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Insurance CostAttorney Asks:

Why did my attorney malpractice premium not go down at renewal?  I’m switching to all criminal work which I know is a lower risk area of practice, but the renewal application only wants to know what was done for the past year.  I told insurer that I want the practice areas changed to criminal anyway.  I want a lower rate this year or I want a new insurer.

Response:

The legal malpractice insurance application is meant to capture what was done on retrospective basis.  Attorney malpractice insurance is written on a claims-made policy form.  Your current inforce claims-made malpractice policy not only covers acts that occur in the current year, but covered acts that occurred in the past.  That is why it is important to maintain your prior acts date.  Most attorney malpractice claims are reported for acts that occurred in prior policy years.  A claims-made policy form is designed to handle these claims.  Remember that the claims-made policy inforce at the time the claim was made is the policy that will cover the claim not the policy inforce when the act occurred.  Many people get confused with occurrence policy forms which are used for home, auto, and business insurance.

With an occurrence policy form changing the areas of practice in the current year and having the rates change at the same time would make sense.  As then the current areas of practice would reflect the future exposure of reported claims as the claims would be covered by the policy inforce when the act occurred, not when the claim was reported.  With the long possible lead time between when the act occurred and when a claim might be reported, no insurer currently is willing to write an attorney malpractice policy using an occurrence policy form. 

Given the retrospective nature of the claims-made malpractice coverage, rating the law firm for what it has done in the past, not want it plans to do more accurately reflects the exposure.  This can be frustrating to many an attorney that is expecting an immediate change in the premium insurance cost.

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