Year after year you complete a malpractice application. It is enough to make you to scream. Attorney malpractice insurers generally want an updated application every year. But why do Business Owners, Workers Compensation and Commercial Auto insurers renew each year without an application?
The exposures Business Owners, Workers Compensation & Commercial Auto seldom change from year to year. Policy premiums go up or down based on the insurers rates. Normally unless a business buys or sells its buildings, cars, or business personal property the exposures remain consistent. These policies are rarely re-underwritten. Insurers generally do not need a new application, but many times will require new MVRs each year for commercial auto. Workers Compensation has premium audits performed annually to address any payroll changes and changing classifications. So, unless there are claims the original application is all that is required. Insureds are still required to notify agents and insurers of material changes which may trigger the account to be re-underwritten.
With attorney malpractice changes in a firm’s makeup, areas of practice and internal controls are addressed on the annual malpractice renewal application. The malpractice underwriter using the application assesses if the firm still meets the insurer’s current underwriting criteria, whether the insurer will offer renewal terms and what the renewal premium should be.
Malpractice insurance exposures can dramatically change from year to year. Malpractice insurers normally re-underwrite each firm annually. There are many reasons for this:
1. A law firm gets into new practice areas.
2. A new client could be a high profile client.
3. The firm may also have grievances or claims that may not have been reported during the policy year. The underwriter may want an explanation as to claim causes and steps are being taken to prevent a future occurrence.
4. The insurer may have changed their underwriting criteria. For example; once a desirable area of practice turns into a forbidden area of practice.
Firms need to exercise great care with renewal apps as not properly answering application questions can cause issues down the road. Also beware of the ‘no application renewal’ where the only question is ‘are there any material changes to report’. With malpractice policies being written on a claims-made policy form, not reporting a claim, grievance or material change can set the firm up for a claim denial later because of ‘Prior Knowledge’.
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Lee Norcross, MBA, CPCU
Managing Director, CEO
(616) 940-1101 Ext. 7080