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 a 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 unexpected claim handling and the 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.
An excess liability policy is designed by policy language to go on top of the primarily limits. It is possible to have multiple excess policies each one stacked upon the other policy(s). Following Form Excess Professional Liability Insurance Policy language is generally very short. It basically 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.
Some Excess Liability Policies are not following form. A through 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.
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 were 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.
Note: The above is general information about a Claims Made Insurance policy concept. Different insurance policies and different situations may or may not treat these concepts in a similar manner.
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Lee Norcross, MBA, CPCU
Managing Director, CEO
(616) 940-1101 Ext. 7080