We are frequently asked why with an Attorney Malpractice policy they cannot purchase a Commercial Umbrella Insurance policy or already have an Commercial Umbrella Policy that they purchased from their Business Owners Insurance carrier or a separate standalone Commercial Umbrella Insurance Policy to cover the law firm for higher legal liability limits beyond the law firm’s Lawyers Professional Liability Insurance Policy? 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? One issue is that most attorney malpractice insurance carriers will not knowingly issue another primary insurance policy on a firm that already has an attorney malpractice insurance policy in place. The more important issue is that with 2 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 normally do not “play nice” together and the law firm can end up with unexpected coverage results depending on how the policies will address a particular claim.
This leads us to the use of an Excess Professional Liability Insurance Policy. 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 underlying policy(s). 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 a following form excess policy. This is what you want for in an Excess Policy. Some Excess Policies are not following form. If it is not following form then you need to make sure that there are not surprises in what and what is not covered.
The Excess Policy generally has a policy retention limit or deductible limit that is equal to the underlying policy limits. In this way the 2 professional liability insurance policies work together to provide coverage with the Excess Policy specifically referencing the Primary Policy. In a perfect world you also want the effective and expiration dates to match.
It is important to report claims to all carriers, even the excess malpractice carriers. Even if the claim does not look like one that will pierce the underlying policy limits, the excess carrier(s) needs 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 carrier will just stand by and only get involved with the claim if it looks like the excess policy limits will be needed.
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