Law firms designate the completion on the Lawyers Professional Liability application to many different people. This varies from the Managing Partner to the beginning associate or newest clerk in the office. While this can be expedient to have the newest member of the staff complete the application it can open up the firm to uncovered exposures, claims and at worst recession of coverage.
Either above or below the signature line of most applications have a phrase like the following:
“I hereby acknowledge that the aforementioned statements and answers are correct and complete to the best of my knowledge and belief and that all information provided including this application, its supplements, attachments and answers to any questions asked by our underwriter will be relied upon by the Company in determining whether to insure and at what rate to insure.”
A new business application Lawyer Professional Liability Insurance application with a new carrier carries more weight with an underwriter and the carrier determining whether the firm is acceptable, if there should be any exclusions added to the policy, or are there exclusions triggered by the application answers, and what rate to charge. A firm can also be tripped up on a renewal application, particularly with failure to disclose potential or actual claim activity or material changes in the firm’s practice or procedures.
Minimum steps that need to be taken while filling out the application:
1. Have a staff member complete the application that is familiar with the firm’s controls, past history and terms or questions on the application.
2. Make sure the roster of attorneys is correct and complete. Many applications ask for all licensed attorneys with the firm. Even one that the firm considers, a “paralegal”, if licensed needs to be included on the attorney roster.
3. For any questions about potential claims, disciplinary matters, outside interests such as a directorship or a geographic area for a client outside of the firm’s normal pattern of clients; the firm should poll the entire staff about these matters.
4. With a multi-member firm, a second member of the firm should also review the completed application once completed to determine its accuracy.
An application with supplements can be normally completed within an hour or two at most. Gathering the information needed, such as polling the staff, can take a number of days. It is best to start this process long before the expiration date. Remember the whole application needs to be complete and accurate for all attorneys, not just the attorney that is completing and signing the application.
Remedies for carriers for incomplete and/or misleading applications can result in a minimum of a change in premium and/or being non-renewed the end of the policy terms. It could cause a claim to be denied. At the most extreme, it could result in rescission of coverage.
A coverage rescission exposes a law firm and its members to many years of uncovered past acts. Lawyers Professional Liability policies are “Claims Made” insurance policies. The premise of a “Claims Made” policy with a prior acts date is the current “Claims Made” policy covers not only the current year, but looks back to the prior acts date to provide coverage for past acts. If the current policy is rescinded, this opens up the prior years past acts to no coverage. The “Innocent Insured” clause is also rescinded so the other firm members that may not have been aware of an application error are also exposed with no insurance protection for the firm’s or their own past acts.