Hanover 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.
Hanover Insurance’s program 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.
- 1st Dollar Defense (FDD) up to $10,000–With this feature the insured is only responsible for the deductible expenses when there is a claim indemnity expenses exceeding $10,000.
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. The Hanover Policy policy language that deals with deductibles is as follows:
C. LIMIT OF LIABILITY AND DEDUCTIBLE
2. Deductible
You will pay the deductible amounts shown on the Declarations page. The deductibles apply as applicable to each Claim or Supplemental Coverage Matter. You must pay the deductible immediately when invoiced or, in the event that offers of judgment or settlement demands are made which You and We agree should be accepted, prior to the expiration of the time period for responding to such offers or demands.
If different parts of a Claim or Supplemental Coverage Matter are subject to different deductibles, the applicable deductible will be applied separately to each part of such Claim or Supplemental Coverage Matter but the sum of such deductibles shall not exceed the largest applicable deductible.
3. Deductible Reduction Benefit
a. Mediation
If We ask, and You agree, to use Mediation to resolve any Claim brought against You, and if the Claim is resolved by Mediation within one hundred eighty (180) days after You receive the suit or demand, Your deductible obligation for that Claim will be reduced by 50%. The maximum amount of the reduction is $10,000.
b. Deductible reductions may not be combined. Only one reduction in Your deductible obligation may be applied to a single Claim. A deductible reduction will not be applied:
1) To any subsequent Claims in the Policy Period; or
2) If the Policy is cancelled, terminated, or non-renewed.
4. Aggregate Deductible
The Aggregate Deductible amount will be shown in the Declarations page, if applicable, and is the most You will pay for the sum of all Deductibles for all Claims to which this Policy applies.
5. Reimbursement
In the event that We voluntarily choose or are compelled by a court of law to make any payment of the deductible or any Loss not covered by this Policy, and request reimbursement from You, the reimbursement is payable immediately, but no later than thirty (30) days after Our written demand.
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
