To save money L Squared is occasionally asked if we will allow a law firm to renew their Attorney Malpractice Insurance Policy without prior acts coverage. In some cases, the firm only carries the malpractice insurance to meet the state requirements or requirements of a referral service. In other cases, it is just to save money. If a 3rd party is relying on the fact that the law firm carries malpractice insurance, but year after year the law firm renews without prior acts, there is less than full disclosure on the law firm’s part as to their true insurance coverage. Given these facts a reputable insurance agency will not support renewing and dropping prior acts.
Attorney malpractice insurance is written on claims-made policy form. Renewing without prior acts coverage means dropping insurance coverage that you have paid for in the past. By dropping prior acts, the firm will not really have meaningful coverage.
Sometimes we get this request because attorneys misunderstand claims-made insurance coverage. Some think that their old expired insurance policies continue to provide insurance coverage for past acts. While this is true for occurrence insurance policies it is not true for claims-made insurance policies. All attorney malpractice insurance policies sold in the USA are sold on a claims-made policy form. With claims-made insurance, the insurer that is on the risk when the claim is made is the insurer that will settle the claim. Even if the claim is reported during the policy period, if the act occurred prior to the prior acts date, then the insurer will decline coverage.
Given the above facts if a law firm wants to drop prior acts coverage for no valid reason L Squared Insurance Agency will not participate.
Lee Norcross, MBA, CPCU
Managing Director, CEO
(616) 940-1101 Ext. 7080