Corepointe – 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.
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. Corepointe policy language that deals with deductibles is as follows:
I. INSURING AGREEMENT
C. Settlement
The Company shall have the right to negotiate a settlement or compromise of a claim as it deems appropriate but shall not commit to settlement of a claim without the written consent of the Named Insured. If the Named Insured refuses to consent to a settlement or compromise recommended by the Company and acceptable to the claimant, then the Company’s Limits of Liability under this policy shall be reduced to the amount for which the claim could have been compromised or settled, plus all claim expenses incurred up to the time the Company makes its recommendation, plus fifty percent (50%) of the claim expenses incurred subsequent to the date of such refusal, which amount shall not exceed the remainder of the Limits of Liability specified in Section III. A.
If any claim covered under this policy is resolved through the use of formal mediation within six months from the date it is first reported to the Company or within 90 days after suit is filed, the Deductible amount the Named Insured is obligated to pay will be reduced by fifty percent (50%), or by $12,500, whichever is less.
The failure of the Named Insured to expressly consent to a settlement or compromise recommended by the Company shall be deemed to be refusal to consent to a settlement or compromise.
III. LIMITS OF LIABILITY AND DEDUCTIBLE
C. Deductible
The deductible amount stated in the Declarations is the total amount of the Insured’s liability for each and every claim and applies to the payment of damages and claim expenses. The deductible shall be paid by the Named Insured or, upon the Named Insured’s failure to pay, jointly and severally by all Insureds. The Limits of Liability set forth in the Declarations are in addition to and in excess of the deductible.
If a claim is based on or arises out of the rendering of eleemosynary (pro bono) legal services, no deductible will apply but only where at the time of retention, there was written approval by the appropriate committee or lawyer within the Named Insured that the matter would be handled without compensation.
CorePointe offers the following deductible options
- 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.
- 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.
Attorney Malpractice Deductible Options by Insurer
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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
