Attorney Protective (NLFI) Choosing the Right Attorney Malpractice Insurance Deductible for You
Selecting the right deductible option is a strategic decision that balances risk and financial planning. It’s not just about current needs but also about anticipating future scenarios. The deductible amount sometimes called a retention amount makes up part of the exposure for the firm.
Factors to Consider When Choosing a Deductible Option:
- Financial Stability: Assess your firm’s ability to handle out-of-pocket expenses associated with higher deductibles.
- Claims History: A firm with few or no past claims might opt for higher deductibles to reduce premiums.
- Risk Tolerance: Consider how much financial risk you’re willing to assume versus paying higher premiums.
- Practice Area: Certain legal specializations carry higher risk, influencing deductible choices.
- Firm Size: Larger firms may face more claims, making aggregate deductibles more appealing.
Attorney Protective (NLFI) offer the Following Deductible options:
- Per Claim Deductible—the firm is responsible for the deductible on each LPL claim. The policy premium is usually less than any other option. Certain practice areas or firm practices may tend to develop multiple claims in a policy year. A per claim deductible can increase the financial risk to the firm.
- Annual Aggregate Deductible—this limits the firm’s deducible cost to the amount listed as the aggregate deductible. A cap is set on the total deductible amount the firm pays within a policy period. No further deductibles apply for that period once you reach the cap. Aggregate deductibles likely increases the premium.
- 1st Dollar Defense (FDD)–sometimes called a loss only deducible. With FDD the insured is only responsible for the deductible when there is a claim indemnity payment. Without FDD the deductible is due as claims expenses or indemnity payments incur. If the claim results in no indemnity payment, then there will no be a deductible owed. The other advantage of having FDD is that with LPL claims the time between the making of the claim and when an indemnity payment is due could be months if not years. FDD does increase the premium.
- Zero Dollar Deductible—with a zero dollar deductible the remaining options do not apply. With a Lawyers Professional Liability Insurance true zero dollar deductible option, the firm has no out-of-pocket deductible costs. Few malpractice insurers offer this option. This option does increase insurance premium costs.
Attorney Malpractice Deductible Options by Insurer
The Lawyer Professional Liability (LPL) different deductible options may be part of the policy or provided as an additional charge. Depending on circumstances a firm may chose more than one deductible option. The deductible options can be in the declarations page or via policy endorsement. Attorney Protective policy language that deals with deductibles is as follows:
C. DEFENSE, SETTLEMENT AND SUPPLEMENTARY PAYMENTS
4. Collaborative Defense
Your deductible as provided in the Declarations of this Policy will be reduced by fifty percent (50%) for the relevant claim if we mutually collaborate with you to successfully resolve the claim and, as a result of such collaboration, any of the following occurs:
a. The claim is settled or resolved by us at mediation before suit is filed at terms and conditions, and for an amount, acceptable to us;
b. The claim is settled or resolved at mediation within 365 days after suit is filed at terms and conditions, and for an amount, acceptable to us;
c. The claim is settled or resolved as evidenced by a written settlement agreement and within 365 days of the date the claim is reported to us at terms and conditions, and for an amount, acceptable to us; or,
d. The claim is settled or resolved by us within your deductible as provided in the Declarations of this Policy, including all payments for damages and claim expenses.
However, the amount of the deductible reduction will not exceed $25,000 for the relevant claim.
6. Supplementary Payments
The most we will pay for all Supplementary Payments payable under this Section is $200,000 per policy period, regardless of the number of Supplementary Payments sought or number of claimants or insureds involved. Payments made pursuant to this provision of the Policy are not part of and do not erode the Limits of Liability set forth in the Declarations and are not subject to the Deductible. Supplementary Payments will be made only for the following:
D. LIMITS OF LIABILITY AND DEDUCTIBLE
4. Deductible
You are obligated to pay all claim expenses and damages up to the amount of the deductible shown in the Declarations for each and every claim. However, the first $25,000 of claim expenses shall not be subject to the deductible and will be paid directly by us. The deductible shall be payable by you, as claim expenses in excess of $25,000 are incurred or as damages are paid. The most you will pay for all damages and claim expenses as deductible for all claims under this Policy shall not exceed the amount stated in the Declarations as the Aggregate Deductible, if applicable. Payment of the deductible shall be made by you within thirty (30) days of our demand for payment. We reserve the rights for all remedies available under the law if you fail to make such payment when due.
This blog is an excerpt from the policy. The complete policy along with applicable endorsements could impact the information provided above.
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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
Lee@L2Ins.com
616-726-7080
