Attorney Malpractice Insurance Policies are claims-made and reported policies. When the coverage ends the ability to report claims for past acts ends at policy termination. Attorneys leaving private practice via retirement, becoming a judge or working in the private or public sector need to protect their past acts. Insurers will not renew attorney malpractice policies for attorneys that are no longer in private practice. Given this it is important for attorneys to protect their past acts once coverage ends. For solo practitioners and small firms that may close once the practitioner leaves, the nonpracticing Extended Reporting Period Endorsement/Retirement Tail (ERP) may be an answer.
Note: For attorneys closing or leaving their small firm to work at another law firm the nonpracticing Extended Reporting Period Endorsement/Retirement Tail (ERP) is not an option. Coverage for their past acts is outside of the scope of this blog.
Each insurer’s policy differs on requirements and wording for obtaining this valuable ERP endorsement at no or reduced cost. Careful planning by the attorney may save the attorney thousands of dollars. The ability to request an ERP differs by insurer but is time sensitive. Regardless of the insurer, the attorney must completely stop private practice to obtain the nonpracticing ERP.
The AmGuard policy provides a nonpracticing ERP based on the following policy language:
SECTION IV – EXTENDED REPORTING PERIOD OPTIONS
B. Nonpracticing Extended Reporting Period If an Insured, as defined in SECTION VI –DEFINITIONS, Section G – Insured, Subsection2, ceases the private practice of law during the Policy Period, and such Insured has been continuously insured by the Company for at least three (3) consecutive years, then such Insured has the right, upon payment to the Company or any of its authorized agents of an additional premium within thirty (30) days of such retirement or the ceasing of the private practice of law, to extend the period for reporting Claims first made against an Insured after the termination of the Policy Period for any actual or alleged act or omission occurring prior to the termination of the Policy Period and otherwise covered by this policy.
Premium for the nonpracticing extended reporting period endorsement shall be computed according to the following percentages based on the annual premium amount shown in the Declarations of this policy:
1. a three year non-practicing extended reporting period for no charge;
2. a six year non-practicing extended reporting period for 100% of the expiring premium
3. an unlimited non-practicing extended reporting period for 150% of the expiring premium.
Any applicable premium will be waived for any Insured who is leaving the private practice of law to become either a state or federal judge.
E. All Reporting Period Options
1. The right to any of the extended reporting period options is not available to any Insured where cancellation or nonrenewal by the Company is due to nonpayment of premium or other money due to the Company or if the Insured has had his or her license to practice law suspended or revoked.
2. The limit of liability available for any extended reporting period option is part of, and not in addition to, the limit of liability shown on the Declarations of the expiring policy. The deductible as shown on the Declarations will apply separately to each and every Claim brought under any extended reporting period option. The deductible will be waived in the event of the death of the Insured or in the event the Insured becomes Totally and Permanently Disabled.
3. None of the extended reporting period options are cancelable. None of the extended reporting options are renewable. The additional premium for the extended reporting period endorsement is fully earned at the inception of the extended reporting period.
Definitions
G. INSURED means:
1. Named Insured, which is the entity shown in Item 1 of the Declarations;
2. any lawyer or professional corporation listed in the application on the day the Policy Period incepts until such time as the lawyer or professional corporation ceases to be a member of the Named Insured subject to section 4 below;
3. any lawyer or professional corporation who becomes a partner, officer, director, stockholder or shareholder or employee of the Named Insured during the Policy Period until such time as the lawyer or professional corporation ceases to be a member of the Named Insured subject to section 4 below;
4. any lawyer or professional corporation who is a former partner, officer, director, stockholder or shareholder or employee of the Named Insured or Predecessor Firm, but only in rendering or failing to render Legal Services on behalf of the Named Insured or Predecessor Firm;
5. any person or entity who is designated by the Named Insured as counsel or of counsel in the application, but only in rendering or failing to render Legal Services on behalf of the Named Insured;
6. any other person who is employed or retained by the Named Insured as a legal secretary, paralegal, contract attorney or other legal office staff member, but only in rendering or failing to render Legal Services on behalf of the Named Insured and also only within the scope of such employment or retention agreement; and;
7. the estate, heirs, executors, administrators, assigns and legal representatives of any Insured in the event of such Insured’s death, incapacity, insolvency or bankruptcy, but only to the extent that such Insured would otherwise be provided coverage under this policy
Switching insurers near retirement to save a few dollars may cost an insured attorney thousands of dollars to buy the same protection. Planning retirement or a transition out of private practice should be discussed with your malpractice insurance agent prior to ending private practice when possible.
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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
(616) 940-1101 Ext. 7080