There are many different deductible options; some are packaged into the policies some are provided as an additional charge.
1. Zero Dollar Deductible—this is listed 1st, as with a zero dollar deductible the options list after this do not apply. With a Lawyers Professional Liability Insurance true zero dollar deductible option, once a claim is presented, the firm has no out of pocket costs for the deductible, whether for claims expenses or indemnity costs. Only a few malpractice carriers offer this option and it does add to the insurance cost.
2. Per Claim Deductible—the firm is responsible for the deductible on each and every attorney malpractice claim. The policy premium is usually less than any other option. Depending on the firm and the areas of practice, it also can be very costly to the firm if multiple claims are filed in one policy year.
3. Aggregate Deductible—this limits the firm’s deducible cost to the amount listed as the aggregate deductible. In many cases this is the same amount as the per claim limit. But the aggregate deductible amount may be are different higher amount. Biggest advantage of this is if there are multiple claims in any one policy period, the law firm’s exposure to deductible costs is capped.
4. 1st Dollar Defense (FDD)—which is sometimes called a loss only deducible. With FDD the insured is only responsible for the deductible if there is an indemnity payment required on the claim. Without FDD the deductible is due as claims expenses or indemnity payments are incurred. If the claim that is made results in no indemnity payment then there will not be a deductible owed for that claim. The other advantage of having FDD is that with many Attorney Malpractice Insurance claims the time between when a claim is made and an indemnity payment is due could be could be many months if not years.
5. Deductible Abatement—this is a unique feature. The only carrier that I know that has this feature at this time is Professional Solutions (PSIC). The deductible abatement is like a savings account that accumulates the longer you are with PSIC. With PSIC the amount of the abatement increases at each renewal by $2500 up to a maximum of $10,000. If a claim is submitted then the abatement is used to offset the deductible costs for the law firm. If the abatement is coupled with an aggregate deductible, the firm with a $10,000 abatement, can pay for a $10,000 deductible, and at least for that one policy period have the benefit of a zero dollar deductible exposure.
6. “Donut Hole” Deductible—is another unique feature. This is now offered by a few carriers and is part of their policy. With this the feature, the carrier pays up to a certain amount, (for example up to $2500) of any attorney malpractice claim made and the firm is responsible their deductible once this amount is exceeded either for claims expenses or indemnity payments. Once the deductible is paid, then the carrier resumes handling claim costs, i.e. the “donut hole”. This is a nice feature that eliminates out of pocket expenses for very small nuisance claims.
Many of the above options can be combined with in the Attorney Malpractice Insurance Policy to offer the law firm the deductible exposure that they are comfortable with at a cost that makes sense for the firm.