Sailing into the SunsetMany people think that there is a separate policy issued once “Tail” is purchased on a Lawyers Professional Liability Insurance Policy.  This is not the case.   Generally the endorsement is just one sheet of paper and only one or 2 paragraphs long.  There is not a separate policy that is issued.  The Extended Reporting Period Endorsement (ERP/Tail) is attached to the last in force policy at the time coverage was terminated.  Other than amending the reporting period, for a specified time from 1 year to up to an unlimited time period, the endorsement does not normally amend any coverage or policy terms. 

I know of no insurance carrier that we increase Lawyers Professional Liability Insurance limits on an ERP.  But there are a few malpractice insurance carriers that are willing to reduce liability limits for the ERP Endorsement.    This will reduce the cost of the ERP.

The caution on reducing the limits is that once reduced, the law firm has reduced limits for any claim that might be reported during the ERP period, even though the law firm may have had much higher limits in the past.  The firm may have paid for the higher limits for many years because of the type of work or clients being handled.  If a past client now brings an action for work done in prior years, the firm will now have an ERP with limits that might be inadequate.

The other problem can be the aggregate attorney malpractice policy limit.  During annual policy periods, the aggregate policy limits normally do not come into play as they are replenished annually.  The firm must realize that the ERP aggregate limit is not replenished annually. The aggregate limit most now provide enough coverage for the terminated policy plus the extension from the ERP was purchased for.  If the law firm is hit with multiple claims in the ERP period, these claims may exhaust the aggregate policy limit.  The aggregate limit needs to be enough to cover the law firm possibility into perpetuity.

So a law firm could save some money up front by buying a reduced limit ERP.  But once the aggregate malpractice limit is exhausted the firm will no longer have coverage as the obligation by the malpractice insurance carrier has been met.

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