Greenwich 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.
Greenwich 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.
- 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
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. Greenwich’s policy language that deals with deductibles is as follows:
I. INSURING AGREEMENT
The Insurer shall pay, on behalf of an Insured, all sums in excess of the Deductible stated in the Declarations, which the Insured shall become legally obligated to pay as Damages and Claim Expenses for a Claim, that is both first made against the Insured during the Policy Period or the Discovery Period (if applicable) and reported to the Insurer during such period pursuant to the terms of this Policy, by reason of: (a) an act or omission in the rendering of Professional Services; or (b) Personal Injury by the Insured or by any person for whom the Insured is legally liable; provided always that such act or omission occurred:
V. LIMIT OF LIABILITY AND DEDUCTIBLE
E. The Insurer shall only be liable for that part of covered Damages and Claim Expenses resulting from each Claim both first made against any Insured and reported in writing to the Insurer during the Policy Period, including the Discovery Period, if applicable, that is in excess of the Deductible stated in item 4. of the Declarations. The Deductible shall be the obligation of the Insured(s) jointly
F. No Deductible will apply to Damages or Claim Expenses for Claims that result from the rendering of, or failure to render, pro-bono services in the Insured’s capacity as a lawyer.
VI. DEFENSE, INDEMNIFICATION AND COOPERATION
D. If the Insurer and the Named Insured agree to the final settlement of a Claim with the claimant during the initial voluntary mediation of that Claim or within thirty (30) days after participation in such mediation, the Named Insured’s Deductible obligation for such Claim will be reduced by fifty percent (50%) subject to a maximum reduction of $25,000. Deductible payments made prior to the application of the above credit will be reimbursed within thirty (30) days of the resolution of the Claim. This reduction does not apply to any Claim resolved through voluntary or involuntary arbitration.
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
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
