All attorney malpractice policies sold in the United States are claims made policies. Conceptually the carrier that is on the risk is the carrier and policy form that will defend the insured should a claim be made during the policy period. This is providing that the act occurs after the prior acts date.
Some lawyers professional liability insurance carriers also have a “knowledge date” in addition to a prior acts date for their claims made coverage. While conceptually most professional liability insurance policies require that a potential claim be made and reported during the policy period. With many malpractice carriers requiring notice at most within 30 days of having knowledge. The “knowledge date” could leave one to assume that it serves to extend this notification period beyond the current policy term.
When taken out of context the use of the “knowledge date” when read literally in the insuring agreement might let an insured think that they are able to not report items until they are actually served with a claim. Here is the current insuring agreement from the Travelers Lawyers Professional Liability Insurance policy.
“The Company will pay on behalf of the Insured, Damages and Defense Expenses for any Claim first made during the Policy Period that is caused by a Wrongful Act committed on or after any applicable Retroactive Date set forth in ITEM 5 of the Declarations, provided that no Insured on the Knowledge Date set forth in ITEM 5 of the Declarations had any basis to believe that such Wrongful Act might reasonably be expected to be the basis of a Claim.”
While conceptually the “knowledge date” could be a benefit for the insured by extending the reporting period, it does open up a number of traps:
1. Most attorney malpractice renewal applications specifically ask if anyone has knowledge of any incident, act, error or omission that could lead to a claim. Even with the “knowledge date” on the declarations page, if the insured answers “no” on the application they could set up a basis for the carrier to deny coverage.
2. If the insured is looking to switch coverage, the insured needs to make sure that any potential incidents or potential claims are reported to the incumbent insurance carrier, as the “knowledge date” means little if the insured switches claims made coverage.
3. The “knowledge date” also further reinforces the need for an insured when going with a new carrier to report any and all claims to the incumbent claims made carrier. As the knowledge date is generally set with the inception date of the 1st policy being written with a new carrier and is in addition to the prior acts date for claims made coverage.
The “knowledge date” is important when an insured switches to a carrier with such a provision on their coverage, because it reinforces the need to report any issues to the incumbent malpractice carrier. But the reality is prior to the anniversary date of any claims made malpractice policy, it is important that all incidents, potential claims or claims be reported.
Note: The above is general information about an Attorney Malpractice Insurance policy concept. Different insurance policies and different situations may or may not treat these concepts in a similar manner.
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Lee Norcross, MBA, CPCU
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