Florida Lawyers Mutual Choosing the Right Attorney Malpractice Insurance Deductible for You
Selecting the right deductible option is a strategic decision that balances risk and financial planning. It’s not just about current needs but also about anticipating future scenarios. The deductible amount sometimes called a retention amount makes up part of the exposure for the firm.
Factors to Consider When Choosing a Deductible Option:
- Financial Stability: Assess your firm’s ability to handle out-of-pocket expenses associated with higher deductibles.
- Claims History: A firm with few or no past claims might opt for higher deductibles to reduce premiums.
- Risk Tolerance: Consider how much financial risk you’re willing to assume versus paying higher premiums.
- Practice Area: Certain legal specializations carry higher risk, influencing deductible choices.
- Firm Size: Larger firms may face more claims, making aggregate deductibles more appealing.
Florida Lawyer Mutual (FMLIC) standard policy has following deductible options included:
- Annual Aggregate Deductible—this limits the firm’s deducible cost to the amount listed as the aggregate deductible. A cap is set on the total deductible amount the firm pays within a policy period. No further deductibles apply for that period once you reach the cap. Aggregate deductibles likely increases the premium.
- 1st Dollar Defense (FDD)–sometimes called a loss only deducible. With FDD the insured is only responsible for the deductible when there is a claim indemnity payment. Without FDD the deductible is due as claims expenses or indemnity payments incur. If the claim results in no indemnity payment, then there will no be a deductible owed. The other advantage of having FDD is that with LPL claims the time between the making of the claim and when an indemnity payment is due could be months if not years. FDD does increase the premium.
Attorney Malpractice Deductible Options by Insurer
The Lawyer Professional Liability (LPL) different deductible options may be part of the policy or provided as an additional charge. Depending on circumstances a firm may chose more than one deductible option. The deductible options can be in the declarations page or via policy endorsement. FMLIC’s policy language that deals with deductibles is as follows:
II. INSURING AGREEMENT
C. DEFENSE AND SETTLEMENT
1. We will defend any covered Claim or Suit brought against the Insured, even if the Claim or Suit is groundless, false or fraudulent. We will defend any non-covered Claim or Suit when such Claim or Suit is filed in conjunction with any covered Claim or Suit arising out of the same act, error or omission until the covered Claim or Suit is resolved by settlement, dismissal or final judgment.
2. We have the right to investigate, retain defense counsel and settle any Claim or Suit. We will not settle a Claim or Suit without consulting the Insured, but the lnsured’s consent to settle will not be required.
3. We will pay all costs of defending the Claim or Suit that do not exceed the applicable Limit of Liability. We will not defend a non-covered Claim or Suit except as set forth in paragraph 1. above. We will not defend or pay any Claim or Suit after the Limit of Liability has been exhausted in paying judgments, settlements, or Claims Expense. We will not defend or pay a Claim or Suit after We have deposited the applicable Limits of Liability of the Policy in a court of competent jurisdiction. If the Limits of Liability have been exhausted before a pending Claim or Suit has been settled. We will withdraw from defending the Claim or Suit and tender the defense to the Insured.
IV. LIMITS OF LIABILITY AND DEDUCTIBLE
C. DEDUCTIBLE
The annual aggregate deductible amount shall only be applied to Damages. Regardless of the number of Claims first made during the Policy Period and any Extended Claims Reporting Period, the total payable by the Insured shall not exceed the annual aggregate deductible amount as stated in the Declarations. The Limit of Liability will apply in excess of the deductible. We will pay covered Claims over the deductible, up to the unused Limit of Liability. If the Company has paid any amounts within the applicable deductible, the Insured agrees to reimburse Us the deductible amount within thirty (30) days after We notify the Named Insured of the amount due. All Insureds are jointly and severally liable for all deductible payments due the Company. The Company has the right to recover from the Insured, any fees and/or costs incurred by the Company in collecting the deductible.
D. NO DEDUCTIBLE FOR PRO BONO ACTIVITIES
The deductible will not apply to any Claim arising from any act, error or omission by an Insured for gratuitous legal services provided for a client who is referred to any Insured by a legal services office qualified for funding by the Federal Legal Services Corporation or sponsored by a voluntary bar association recognized by The Florida Bar.
This blog is an excerpt from the policy. The complete policy along with applicable endorsements could impact the information provided above.
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Lee Norcross, MBA, CPCU
California License # 0D87292
L Squared Insurance Agency, LLC ® DBA in California as L2 L Squared Insurance Agency, License # 0L93416
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Lee@L2Ins.com
616-726-7080
