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 Aspen policy provides a nonpracticing ERP based on the following policy language:
VI. EXTENDED REPORTING PERIODS
C. Retirement Option
Upon retirement from the practice of law, any lawyer who qualifies as an Insured shall be entitled to an individual extended reporting period with a seven (7) year reporting period for no additional premium, if the lawyer:
1. Is at least fifty-five (55) years old;
2. Was employed by, or a partner, officer, director, or stockholder of the Named Insured during the policy period and had been insured by the Company under the Lawyers Professional Liability Policy continuously for at least three (3) full years;
3. Has permanently and totally ceased the practice of law which includes any professional services; and
4. Notifies the Company of the retirement and requests an individual extended reporting period within sixty (60) days of the cancellation, nonrenewal or expiration of this policy.
D. Death or Permanent Disability Option
Any lawyer who qualifies as an Insured who dies or becomes permanently disabled during the policy period shall be entitled to an individual extended reporting period with a seven (7) year reporting period for no additional premium, if:
1. The lawyer was employed by the Named Insured during the policy period and died or became disabled during the policy period;
2. Satisfactory written evidence of death or permanent disability is provided to the Company;
3. The lawyer or lawyer’s representative notifies the Company of the death or disability and requests issuance of an individual extended reporting period within sixty (60) days following the cancellation, nonrenewal or expiration of this policy.
Any extended reporting period is not a new policy. Any claim submitted during such extended reporting period shall be governed by the terms and conditions of this policy.
F. Limits of Liability
The limit of liability for any extended reporting period offered under Sections A., B., C., and D. above shall be part of and not in addition to the limits of liability stated in Item 4. of the Declarations, subject only to the following exceptions: If the Company offers to renew this policy and the Named Insured refuses to accept such renewal offer, then the limit of liability for any claim first reported during any extended reporting period shall be as follows:
1. If the Named Insured has been continuously insured by the Company for three (3) or more years when the extended reporting period takes effect, then the aggregate limit of liability, if previously depleted, shall be reinstated to the amount stated in Item 4. of the Declarations as the aggregate limit of liability; or
2. If the Named Insured has not been continuously insured by the Company for three (3) or more years when the extended reporting period takes effect, then the aggregate limit of liability shall be the greater of the remaining aggregate limit of liability under the policy or fifty
percent (50%) of the amount stated in Item 4. of the Declarations as the aggregate limit of liability.
G. Elimination of Right to any Extended Reporting Period
There is no right to any extended reporting period if the Company cancels or refuses to renew this policy due to:
1. Nonpayment of amounts due under this policy;
2. Noncompliance by the Insured with any of the terms and conditions of this policy;
3. At the time this right could be exercised by the Named Insured, any Insured’s right to practice law has been revoked, suspended or surrendered at the request of any regulatory authority for reasons other than the Insured is totally and permanently disabled; or
4. Any material misrepresentation or omission in the application or the supplementary information and statements provided by the Insured for this policy.
G. Extended reporting period means the period of time after the end of the policy period for reporting claims to the Company that are first made against the Insured during the applicable extended reporting period by reason of an act or omission, which was committed prior to the end of the policy period and on or subsequent to the retroactive date, and is otherwise covered by this policy.
H. Insured means:
1. The Named Insured;
2. Any predecessor firm;
3. Any past, present or future partner, incorporated partner, officer, director, stockholder, member, manager, associate, independent contractor, professional corporation, employee, or “of counsel” of the Named Insured, but only with respect to professional services
performed on behalf of the Named Insured or any predecessor firm;
4. Any Insured’s spouse or domestic partner, but only with respect to any claim resulting from professional services performed on behalf of the Named Insured or any predecessor firm;
5. The estate, heirs, executors, administrators, and legal representatives of any Insured in the event of the Insured’s death, incapacity or bankruptcy, but only with respect to professional services performed on behalf of the Named Insured prior to such Insured’s death, incapacity or bankruptcy.
I. Named Insured means the persons or entities specified in Item 1. of the Declarations or specifically designated by endorsement.
M. Named Insured Sole Agent
The Named Insured will be the sole agent and will act on behalf of all Insureds for the purpose of giving or receiving any notices, any amendments to or cancellation of this policy, for the completing of any applications and the making of any statements, representations and warranties, for the payment of any premium and the receipt of any return premium that may become due under this policy and the exercising or declining to exercise any right under this policy including the purchase of an extended reporting period under Section VI. of 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