Question from Law Firm:
My Attorney Malpractice Insurer just non-renewed my policy because of a claim, now all I can get is ‘Surplus Lines’ or ‘Non-admitted’ insurers for a much higher premium. How many years after a Legal Malpractice claim do I have to wait to get back with an ‘admitted’ Attorney Malpractice Insurer?
There is no set answer to this question. Unfortunately for law firms with claims one of the best predictors of future malpractice claims is past malpractice claims. As a rule of thumb, if there is no other claims activity, it is normally 3 to 5 years, before an admitted insurer considers providing attorney malpractice quotes. Yes this can cause much frustration for the law firm, but there is more.
Much depends on the type of legal malpractice claim, the size of the claim and the circumstances that caused the claim. If the Legal Malpractice claim was ‘preventable’ because of an error in judgement or a lapse in procedure and the law firm has taken steps to address these shortcomings, then there may be a story for getting the law firm back in the admitted market sooner.
Firms can do things to hinder getting back with an admitted insurer. When law firms do not take responsibility for the claim, refuse to provide details of what took place, and/or do not address the issues that may have caused the claim expect to wait until the claim is outside of the 5 year window or even beyond.
Underwriting rules change through the years. A law firm may have been with one insurer for many years, and the insurer may continue to renew the firm as long as it remains claims free. Even if the law firms practice is now outside of the insurer’s current underwriting guidelines the insurer continues to renew. The collections practice area is a good example. Certain practice areas, such as collections, are known for frequency and severity issues. Most admitted carriers no longer will write collections law firms where that did prior to the FDCPA. Law firms with claim activity in high frequency or severity areas of practice may never get back with an admitted carrier.
If the law firm has a frequency issue for legal malpractice claims, even if there are no damages paid, then the law firm may have to continue with coverage through surplus lines insurers for the foreseeable future. The indemnity payment and the defense cost amounts both matter, the larger the claim payout, the longer the window to get back with an admitted insurer.