General Star National (GenStar) Choosing the Right Attorney Malpractice Insurance Deductible for You
Selecting the right deductible (retention) 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 (Retention) 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.
GenStar offers the Following Deductible (Retention) options:
- Per Claim Retention—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.
- Retention Incentive—For each completed Policy Period of continuous Claim-Free experience with the Founders Specialty Purchasing Group for Lawyers, Inc. (the RPG), a 10% reduction shall be applied to the Retention specified in item 5 of the Declarations up to a maximum reduction of 50% after five (5) completed Policy Periods of such continuous Claim-Free experience.
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. GenStar’s policy language that deals with deductibles (retention) is as follows:
II. EXTENSIONS
Any payment by the Insurer pursuant to this Section II. shall be in addition to the Limits of Liability specified in Item 4 of the Declarations and the Retention shall not apply. With respect to Pre-Claim Expenses, once a Claim is made, Damages and Claim Expenses that result from such Claim shall reduce the applicable Limits of Liability and be subject to the Retention.
V. LIMITS OF LIABILITY AND RETENTION
E. The Insurer shall only be liable for those amounts payable as Damages and/or Claim Expenses which are in excess of the Retention stated in Item 5 of the Declarations. The Retention shall apply separately to each Claim and shall be paid by the Named Insured. The Named Insured shall promptly make direct payments within the Retention to the appropriate parties as designated by the Insurer. The Insurer shall have no obligation to make payments within the Retention. If the Named Insured fails to pay the Retention, then all Insureds shall be jointly and severally obligated to pay the Retention. If the Insurer brings suit to collect such amounts, then the Insureds responsible to pay such amounts shall pay the legal fees, costs, and expenses incurred by the Insurer to collect such amounts.
F. The Retention shall not apply to a Claim otherwise covered by this Policy arising solely out of Professional Services rendered on a pro bono basis, if, prior to the performance of such services, a partner, director or officer of the Named Insured approved of such services without a fee.
G. The Named Insured’s Retention obligation shall be reduced by 50%, subject to a maximum reduction of $25,000, for any Claim in which the Insurer and the Named Insured agree to final settlement with all claimants during the initial mediation of such Claim or within 30 days after participation in such mediation. This reduction does not apply to any Claim resolved through arbitration.
Founders Specialty Rewards Endorsement
It is agreed that:
1.Retention Incentive
For each completed Policy Period of continuous Claim-Free experience with the Founders Specialty Purchasing Group for Lawyers, Inc. (the RPG), a 10% reduction shall be applied to the Retention specified in item 5 of the Declarations up to a maximum reduction of 50% after five (5) completed Policy Periods of such continuous Claim-Free experience.
Claim-Free means that the combined total incurred amount shown on the Insurer’s loss runs provided to the RPG for all Claims, Disciplinary Proceedings and facts, circumstances or situations reported pursuant to Section VI. B.is less than $5,000 times the number of Policy Periods that the Named Insured has had continuous coverage through the RPG.
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
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L Squared Insurance Agency, LLC ® DBA in California as L2 L Squared Insurance Agency, License # 0L93416
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