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 ProAssurance policy provides a nonpracticing ERP based on the following policy language:
SECTION 6. EXTENDED REPORTING PERIOD OPTION
6.4. EXTENDED REPORTING PERIOD ENDORSEMENT – NON-PRACTICING INSURED
6.4.1. A Non-Practicing Insured Extended Reporting Period Endorsement providing an unlimited extended reporting period will be issued and the premium and Deductible amounts shown in the Declarations will be waived (other than Deductible amounts the Insured becomes obligated to pay prior to the exercise of this provision) if an Insured lawyer:
a) dies;
b) becomes totally and permanently disabled and unable to engage in professional services as a result of accidental bodily injury, physical illness, or disease, and not involving the abuse of intoxicants or controlled substances, as certified by a physician acceptable to the Company; or
c) has been continuously insured with the Company for the immediately preceding three (3) years and is no longer engaged in professional services for which the Insured lawyer performs on a pro-bono basis or receives monetary or other financial compensation, as a result of total and permanent retirement or voluntary cessation of the full-time or part-time practice of law.
6.4.2. The Non-Practicing Insured Extended Reporting Period Endorsement applies only to claims otherwise covered by this policy:
a) involving acts, errors, or omissions of the individual Insured that occurred on or after the Retroactive Date and prior to the Non-Practicing Insured Extended Reporting Period Effective Date shown in the Non-Practicing Insured Extended Reporting Period Endorsement; and
b) first made against the individual Insured and first reported to the Company on or after the Non-Practicing Insured Extended Reporting Period Effective Date and prior to the Non-Practicing Insured Extended Reporting Period Expiration Date shown in the Non-Practicing Insured Extended Reporting Period Endorsement.
6.4.3. The Non-Practicing Insured Extended Reporting Period Endorsement does not reinstate or increase the Limit of Liability on the policy. The Non-Practicing Insured Extended Reporting Period Endorsement does not provide coverage for claims that are covered under any other valid and collectible insurance, whether issued by the Company or any other insurer, or that would have been covered but for the exhaustion of the limit of liability of the other insurance or but for the failure of any Insured to comply with the terms and conditions of the other insurance.
6.4.4. If a Non-Practicing Insured Extended Reporting Period Endorsement is received as a result of retirement or disability and at a later date the Insured resumes rendering professional services, for any reason, in any jurisdiction, the Insured agrees that on that date coverage under the Non-Practicing Insured Extended Reporting Period Endorsement will terminate.
6.4.5. The Named Insured or individual Insured’s estate executor must notify the Company in writing requesting the Non-Practicing Insured Extended Reporting Period Endorsement within sixty (60) days after the Policy Termination Date. If the Non-Practicing Insured Extended Reporting Period Endorsement is requested for a sole practitioner before the Policy termination date, the policy period shall be terminated on the effective date of the Non-Practicing Insured Extended Reporting Period Endorsement with the return of any unearned premium waived.
6.5. LOSS OF LICENSE – NO AUTOMATIC OR EXTENDED REPORTING PERIOD
If an Insured receives an order resulting in the loss, suspension, or revocation of their license to practice law, or surrenders their license as part of a disciplinary proceeding or action, the Insured is not eligible for the Limited Automatic Reporting Period set forth in Section 6.1 of this policy or any other option for an extended reporting period under Section 6 of this policy, such eligibility to be terminated as of the date of the subject order. If the Insured has a solo practice at the time the license is lost, neither the firm nor the Insured is eligible for the Limited Automatic Reporting Period set forth in Section 6.1 of this policy, and neither the firm nor the Insured may exercise any other option for an extended reporting period under Section 6 of this policy.
SECTION 1. DEFINITIONS
Insured means (1) the Named Insured; or (2) any Predecessor Firm; or (3) any lawyer who is a partner, limited liability partner, limited liability company member, officer, director, stockholder, employee, or independent contractor of the Named Insured, solely while acting in a professional capacity on behalf of the Named Insured or any Predecessor Firm; or (4) any lawyer who was a partner, limited liability partner, limited liability company member, officer, director, stockholder, employee, or independent contractor of the Named Insured or any Predecessor Firm, solely while acting in a professional capacity on behalf of the Named Insured or any Predecessor Firm; or (5) any non-lawyer who was or is an employee of the Named Insured or any Predecessor Firm, solely while acting within the scope of their employment on behalf of the Named Insured or any Predecessor Firm; or (6) any past or present “of counsel” lawyer, solely while acting in a professional capacity on behalf of the Named Insured or any Predecessor Firm; or (7) the heirs, assigns, and legal representatives of an Insured in the event of the Insured’s death, incapacity, or bankruptcy, to the extent that the Insured would have been covered.
Named Insured means the firm or individual lawyer shown in Item 1 of the Declarations and any Predecessor Firm.
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.
Lee Norcross, MBA, CPCU
Managing Director, CEO
(616) 940-1101 Ext. 7080