Request from our Client:
I need to add a rider to our Lawyers Professional Liability Insurance Policy to increase my limits to cover a large real estate deal for a client.
Response:
The answer to this question hinges on whether your client requires a higher limits or the work involves a higher work exposure to the firm.
An insurer may endorse a specific entity endorsement with an increase limit, but this is not a common endorsement for malpractice insurers. If the temporary client requires a higher liability limit but there is no increase in exposure a specific entity endorsement for the engagement term may be appropriate.
If the client’s work increases the law firm’s exposure beyond current policy limits, then a temporary endorsement for the client engagement may be a problem. A Lawyers Professional Liability Policy is a “claims-made policy.” Given this if a claim is made against the policy, the claim settles using the policy form in force at the time the claim is made, past policy coverage for the client does not matter. Once the policy is endorsed for the increased limits, you need to maintain those limits (or the entity endorsement) until the statute of limitations has run. Even naming the client with a temporary increase in limits for the current coverage does not accomplish this. Once the current policy expires if the renewal does not have the specific client endorsement there is no higher limits coverage for the client.
This is a “large” real estate deal and real estate deals have long liability half-lives. Given a prolonged exposure tail the firm should maintain the coverage until the statute of limitations runs.
Note each instance is unique and the appropriate coverage may differ.
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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
Managing Director, CEO
Lee@L2Ins.com
616-726-7080
