Attorney Malpractice Excess Professional Liability Insurance Coverage
We are frequently asked why a Commercial Umbrella Insurance policy cannot be used to increase liability limits for their attorney malpractice exposure. The simple answer is that a Commercial or Personal Umbrella Insurance policy specifically excludes coverage for work done by an attorney.
The other question we are asked is, why not just purchase another primary attorney malpractice policy for the additional limits needed? Most attorney malpractice insurance insurers will not knowingly issue another primary insurance policy for a firm that already has an attorney malpractice insurance policy in place.
The reason is that with two primary insurance policies in force, the other insurance clause that deals with multiple primary policies addressing the same claim comes into play. Two primary attorney malpractice insurance policies that address the same claim may not “play nice” together. As the policy language is not standard between insurers, you can expect unexpected claim handling and claim settlements. Last thing a law firm wants when a claim is being handled is an unexpected process and damages settlement, depending on how each policy addresses a claim based on the other insurance clause.
Where umbrella insurance policies may cover a broad range of perils, some might even cover perils that are not covered with the underlying insurance, this is rarely the case with excess liability insurance.
How Professional Liability Insurance Works
Professional liability insurance, also known as errors and omissions (E&O) insurance, is designed to protect professionals from claims of negligence, mistakes, or failure to perform their duties. This type of insurance is crucial for individuals in service-oriented industries like legal, medical, accounting, and consulting fields.
The way professional liability insurance works is by covering the costs associated with defending a claim and any resulting damages if a client alleges that the professional made an error or failed to deliver the promised service. It applies to situations where clients believe the service provided was inadequate or caused them financial harm, even if the professional did not act intentionally or maliciously.
Typically, professional liability insurance covers legal fees, court costs, settlements, and judgments, protecting professionals from potentially devastating financial consequences. It also helps maintain the professional’s reputation, as clients are more likely to trust a business that has this coverage in place.
Each policy is tailored to the specific industry and the professional’s unique needs, so coverage limits and exclusions can vary. However, liability policies include per-claim and aggregate coverage limits, as well as sub-limits.
Ultimately, professional liability insurance provides peace of mind, allowing professionals to focus on their work without fearing the financial impact of legal claims.
What is Excess Professional Liability Insurance Coverage?
An excess liability policy is designed with policy language to go on top of the primary limits. It is possible to have multiple excess policies, each one stacked upon the other policy(s). Following the Form Excess Professional Liability Insurance Policy language is generally very short. It states that it is incorporating the policy language of the primary policy as the basis for addressing what claims are covered and what is not. This is what you want to look for in an Excess Policy. The Excess Policy generally has a policy retention limit or deductible limit that is equal to the underlying policy limits. In this way, the two professional liability insurance policies work together to provide coverage with the Excess Policy specifically referencing the Primary Policy. But beware of endorsements that may change or exclude coverage. In a perfect world, you also want the effective and expiration dates to match.
Excess liability policies may not be “follow-form.” A thorough reading of these excess policies is needed. Care needs to be taken to make sure that the coverages you need are not excluded. These excess policies may have different triggers or definitions as to what is a claim. But in most regards, the function of these excess policy types is the same as the following form policy.
When Is It Important To Report Claims?
It is important to report claims to all insurers, including the excess malpractice insurers. Even if the claim does not look like one that will pierce the underlying policy limits, the excess insurer(s) need to be put on notice as with all claims made coverage. If the claim spans multiple years, the only policies that will address the claim are the ones in force when the claim was initially known and reported. In most cases, the excess insurer will just stand by and only get involved with the claim if it looks like the excess policy limits will be needed. Not reporting the claim to the excess insurer on a timely basis could cause the claim to be denied at a later time.
Who Needs Excess Professional Liability Insurance?
Excess professional liability insurance is essential for professionals when the primary insurer cannot or will not provide the higher limits needed(or required by contract) to increase their protection against high-cost claims. This is especially beneficial in high-risk practice areas such as medical malpractice, securities, and patent prosecution. Professionals may also have contracts that require higher liability coverage limits.
Excess coverage increases the limits of an underlying policy, providing additional financial protection. It’s especially important for professionals like accountants or lawyers who deal with complex client matters and can face significant financial consequences.
How Do I Get Professional Liability Insurance?
Getting professional liability insurance is a straightforward process, but it requires careful consideration of your specific professional needs. For those in fields such as law, accounting, or healthcare, it’s crucial to choose a policy tailored to your work. For example, professional liability insurance for attorneys (LPL) only covers work that is typically performed by attorneys. Similarly, professional liability insurance for accountants only provides coverage for work that is expected to be done by accountants. Start by evaluating the level of risk in your profession, then research providers who specialize in professional liability insurance. Insurance agencies can help guide you through the selection process, ensuring you get adequate coverage at a competitive price.
Why Choose L Squared Insurance Agency For Your Professional Liability Insurance?
L Squared Insurance Agency stands out for its expertise in tailoring professional liability insurance to meet the unique needs of various professionals. Whether you’re a lawyer, accountant, paralegal, or title agency, we understand the complexities of your industry and provide personalized solutions.
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Professional Liability Insurance FAQ
What does Professional Liability insurance cover?
Professional liability insurance covers claims resulting from errors, omissions, or negligence in the services you provide. For professionals like attorneys, this may include legal errors, missed deadlines, or inadequate advice. The policy protects against both defense costs and damages.
Do All Professionals Need PLI?
Not all professionals are legally required to carry professional liability insurance, but it’s highly recommended for those offering specialized services. For example, professional liability insurance for lawyers or accountants is essential to safeguard against the risk of lawsuits arising from professional mistakes.
Is Professional Liability Insurance legally required?
While not always legally required, many states or professional bodies may mandate professional liability insurance for specific industries, such as healthcare or law. For example, attorneys often need professional liability insurance for lawyers to comply with bar requirements.
What are the main differences between Professional Liability Insurance and E&O Insurance?
Professional liability insurance and errors & omissions (E&O) insurance essentially serve the same purpose, covering claims of negligence, errors, or omissions in professional services. Either term can be used.
What is an example of a professional liability?
An example of professional liability claim could involve an attorney who provides incorrect legal advice, leading to financial loss for a client. In such cases, professional liability insurance would cover the attorney’s defense costs and any settlement or judgment.
Do I need professional liability insurance for my LLC?
Yes, even if you operate your business as an LLC, professional liability insurance is still necessary. An LLC does not shield you from claims related to errors or omissions in your professional services. You need coverage to protect your assets.
What triggers a professional liability policy?
A professional liability policy claim is triggered when the insured notifies the insurer in writing of any of the following: a demand for damages or equitable relief; a suit against the insured; formal administrative or regulatory charges; an arbitration or mediation proceeding that has commenced; or a written request by the insured to toll or waive a statute of limitations.
Note: The above is general information about a Claims Made Insurance policy concept. Different insurance policies and different situations may or may not similarly treat these concepts.
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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
