ALPS LawyerCare 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.
ALPS LawyerCare program offers the Following Deductible options:
- Per Claim Deductible—the firm is responsible for the deductible on each LPL claim. The policy premium is usually less than any other option. Certain practice areas or firm practices may tend to develop multiple claims in a policy year. A per claim deductible can increase the financial risk to the firm.
- 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.
- Zero Dollar Deductible—with a zero dollar deductible the remaining options do not apply. With a Lawyers Professional Liability Insurance true zero dollar deductible option, the firm has no out-of-pocket deductible costs. Few malpractice insurers offer this option. This option does increase insurance premium costs.
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. ALPS LawyerCare policy language that deals with deductibles is as follows:
5.4. DEDUCTIBLE
The Deductible amounts shown in Item 5 of the Declarations apply to each claim and in the Aggregate for the policy period and are in excess of the Limit of Liability shown in Item 4 of the Declarations. The Per Claim Deductible applies to the sum of all damages and claim expenses and shall be paid by the Named Insured within thirty (30) days of written demand. The Aggregate Deductible amount is the most the Named Insured shall pay for the sum of all damages and claims expenses for all claims first made and reported to the Company during the policy period or an extended reporting period. In the event the Company in its sole discretion pays on behalf of an Insured all or part of the Deductible, the Named Insured shall reimburse the Company for the amount of the payment within thirty (30) days after written demand. The Named Insured agrees to pay all costs, including attorneys’ fees and court costs, incurred by the Company in collecting any reimbursement.
5.5. MEDIATION
If any claim covered under this policy is resolved through the use of formal mediation within six months from the date it is first reported to the Company or within ninety (90) days after suit is filed, the Deductible amount the Named Insured is obligated to pay will be reduced by fifty percent (50%), or by $20,000, whichever is less.
5.6. ATTORNEY DISCIPLINE DEFENSE
5.6.4. All of the terms and conditions of this policy shall apply with respect to the Attorney Discipline Defense provided under Section 5.6.1, except that Section 5.6.1 is not subject to any Deductible.
5.8. EMPLOYMENT PRACTICES DEFENSE
5.8.2. The Company will not pay more than an aggregate total of $20,000 per policy period under Section 5.8.1 regardless of the number of claims made, the number of Insureds involved in the claim(s), or the number of persons or entities making the claim(s). Any payments made by the Company under Section 5.8.1 shall be in addition to the Limit of Liability shown in Item 4 of the Declarations, and are not subject to any Deductible.
5.9. SUBPOENA ASSISTANCE
5.9.2. The Company will not pay more than an aggregate total of $20,000 per policy period under Section 5.9.1 regardless of the number of subpoenas issued or the number of Insureds subpoenaed. Any notice the Insured gives the Company of such subpoena shall be deemed notification to the Company under Section 7.1. Such fees and expenses incurred under Section 5.9.1 shall be in addition to the Limit of Liability shown in Item 4 of the Declarations, and are not subject to any Deductible.
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
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