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 General Star Insurance policy provides a nonpracticing ERP based on the following policy language:
VI. CONDITIONS
C. EXTENDED REPORTING PERIOD COVERAGE
In the event of cancellation or non-renewal of this Policy, by either the Named Insured or the Insurer, for reasons other than nonpayment of premium, the Named Insured shall have the right to an Extended Reporting Period as follows:
3. INDIVIDUAL EXTENDED REPORTING PERIOD COVERAGE
If during the Policy Period an Insured, other than the Named Insured, permanently ceases performance of Professional Services as a result of retirement, becoming permanently disabled, or death except by suicide, such Insured shall be entitled to an unlimited period for reporting Claims first made against such Insured under this Policy. Such reporting period shall be referred to as the Individual Extended Reporting Period.
There shall be no charge for the Individual Extended Reporting Period for eligible Insureds who die or become disabled during the Policy Period. The charge for the Individual Extended Reporting Period for eligible Insureds who retire during the Policy Period is $1,500 per Insured; provided however, if the Named Insured has continuously renewed and maintained in effect a Lawyers Professional Liability Policy issued by an Insurer engaged through the Founders Specialty Purchasing Group for Lawyers, Inc., for three consecutive years immediately prior to the request for the Individual Extended Reporting Period, no charge shall apply.
The right to an Individual Extended Reporting Period is subject to the following conditions:
a. the coverage shall apply only to Claims for Wrongful Acts fully occurring prior to the date of retirement, permanent disability or death of such Insured and otherwise covered by this Policy and which are first made against such Insured and reported to the Insurer during the Individual Extended Reporting Period;
b. such Insured’s license to practice law has not been revoked, suspended or surrendered at the request of any regulatory authority for reasons other than the Insured is disabled;
c. the right of an Insured to elect an Individual Extended Reporting Period must be exercised in writing to the Insurer, accompanied by any additional premium due, during the same Policy Period that the Insured retired, became permanently disabled, or died, or within 60 days of the ending date of such Policy Period. Such written notice must include evidence of such retirement, disability, or death. The Individual Extended Reporting Period will not go into effect unless such written notice and additional premium due, if any, is received by the Insurer promptly when due;
d. the Policy was not cancelled due to non-payment of premium, any Retention or other amounts owed the Insurer have been paid, and the Insured(s) has complied with all other terms and conditions of the Policy;
e. the Individual Extended Reporting Period shall not apply to any Claim made while this Policy is in force or any successive renewal of this Policy is in force, or any other Extended Reporting Period that applies to this Policy or any renewal of this Policy is in force, nor will it apply if any other insurance applies to the Claim;
f. the Individual Extended Reporting Period does not increase or reinstate the limits of liability of the Policy or extend the Policy Period;
g. any Claim made during the Individual Extended Reporting Period shall be deemed to have been made during the Policy Period. The entire premium for the Individual Extended Reporting Period shall be deemed fully earned at the inception of the Individual Extended Reporting Period.
III. DEFINITIONS
H. Insured means:
1. the Named Insured and any Predecessor Firm;
2. any individual or professional corporation who is or becomes a partner, principal, officer, director, stockholder, or employee of the Named Insured, but solely with respect to Professional Services performed on behalf of the Named Insured or Predecessor Firm;
3. any individual or professional corporation who was a partner, principal, officer, director, stockholder, or employee of the Named Insured or Predecessor Firm, but solely with respect to Professional Services performed on behalf of the Named Insured or Predecessor Firm;
4. any “of counsel” or independent contractor who is a natural person, but solely with respect to Professional Services performed on behalf of the Named Insured or Predecessor Firm and pursuant to a written contract with the Named Insured or Predecessor Firm; or
5. the heirs, executors, administrators, and legal representatives of any Insured in the event of death, incapacity or bankruptcy, and the lawful spouse or a person qualifying under applicable law as a domestic partner of such Insured, but solely with respect to Professional Services rendered by the Insured prior to such Insured’s death, incapacity or bankruptcy and only to the extent that such Insured would otherwise be covered by this Policy.
J. Named Insured means the person or entity shown in Item 1 of the Declarations.
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
Managing Director, CEO
(616) 940-1101 Ext. 7080