Berkley Insurance – 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.
Berkley Insurance offers 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.
- 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.
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. Berkley’s policy language that deals with deductibles is as follows:
II. Limits of Liability and Deductible
C. Deductible
1. If option A. “Aggregate Deductible – All Claims” is selected in Item 6. of the Declarations, the Deductible amount stated in Item 6. A. is the total amount of the Insured’s liability for all Claims first made and reported to the Insurer during the Policy Period. The Deductible shall be paid by the Named Insured, or upon the Named Insured’s failure to pay, jointly and severally by all Insureds against whom the Claim is made. The Limits of Liability set forth in the Declarations are in addition to and in excess of the Deductible.
2. If option B. “Each Claim Deductible” is purchased in Item 6. of the Declarations, the Deductible amount shall apply to each and every Claim first made and reported to the Insurer during the Policy Period. The Deductible shall be paid by the Named Insured, or upon the Named Insured’s failure to pay, jointly and severally by all Insureds
a. against whom the Claim is made. The Limits of Liability set forth in the Declarations are in addition to and in excess of the Deductible.
3. If option i. “Deductible applies to Damages and Claim Expenses” is selected as indicated in Item 6. of the Declarations, the Insurer shall be liable for the amount of Damages and / or Claim Expenses arising from a Claim which is in excess of the Deductible amount stated in Item 6. of the Declarations.
4. If option ii. “Deductible applies only to Damages” is purchased as indicated in Item 6. of the Declarations, the Insurer shall be liable for the amount of Damages arising from a Claim which is in excess of the Deductible stated in Item 6. of the Declarations. No Deductible shall apply to Claim Expenses.
5. The Insurer has the right, but not the obligation, to advance any Damages and / or Claim Expenses within the Deductible. Any funds advanced by the Insurer shall serve to reduce the Limits of Liability. If the Insurer brings suit to collect the Deductible, then the Insured responsible to pay the Deductible also shall pay the legal fees, costs and expenses incurred by the Insurer to collect the Deductible.
F. Risk Management Incentives
Mediation
If mediation of a Claim takes place either without institution of arbitration proceeding or service of suit or within 60 days of the institution of such proceedings or service of suit, and such Claim is ultimately resolved for an amount acceptable to the Insured and the Insurer by the process of mediation, the Insured’s deductible, applying to the Claim, will be reduced by 50%. In no event shall the amount of the deductible waived hereunder exceed $10,000.
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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
