Options Right for YouMany attorneys are surprised to find that attorney malpractice insurance policies have a deductible.  The deductible may be mandated by the underwriter to address small frequent claims or chosen by the insured to reduce premiums or claim costs.  Not only can you vary the size of the deductible but you can use different options to help balance the cost of the insurance with the cost of claims. 

The deductible options can be packaged into the policies or as an endorsement for an additional charge.  Choosing the combination of options that is right for your firm can be tricky.  Understanding these options helps you choose the options that are right for you. 

Here are the major options:

1.       Zero Dollar Deductible—this is listed first because if you have a zero dollar deductible the options listed below do not apply.  With a Lawyers Professional Liability Insurance policy zero dollar deductible once a claim is presented, the firm has no out of pocket deductible costs, whether for claims expenses or indemnity costs.  Only a few insurers offer this option and it increases the insurance policy premium.

2.       Per Claim Deductible—the firm is responsible for the deductible on each and every attorney malpractice claim.  This is the least expensive deductible option.  Depending on the firm and the areas of practice, it also can be very costly to the firm if multiple claims are filed in any one policy year.

3.       Aggregate Deductible—this limits the firm’s deducible cost to the amount listed as the aggregate deductible for the policy period.  It may be the same amount as the per claim limit.  But the aggregate deductible amount may be are different higher amount.  Biggest advantage of this is if there are multiple claims in any one policy period, the law firm’s exposure to deductible costs is capped.  We have seen a few firms hit was 6 or 7 different claims in one year.  If the firm is carrying a $10,000 per claim deductible then the out of pocket costs could be $60,000 or $70,000.  Most insurers charge for adding this option.  The cost of this is well worth the extra expense.

4.       1st Dollar Defense (FDD)—which is sometimes called a loss only deducible.   With FDD the insured is only responsible for the deductible if there is an indemnity payment made on the claim.  Without FDD the deductible is due as claims expenses or indemnity payments are incurred.   But with an FDD, If the claim made results in no indemnity payment then there will be no deductible owed.  The other advantage of having FDD is that with many attorney malpractice Insurance claims the time between when a claim is made and an indemnity payment is due could be could be many months if not years.  Most insurers charge for adding this option.

5.       Deductible Abatement—this is a unique feature.  The only insurer that I know that has this feature is Professional Solutions (PSIC).  The deductible abatement is like a savings account that accumulates the longer you are with PSIC.  With PSIC the amount of the abatement increases at each renewal by $2500 up to a maximum of $10,000.  If a claim is made then the abatement is used to offset the deductible costs for the law firm.  If the abatement is coupled with an aggregate deductible, then the firm with a $10,000 abatement can carry a $10,000 deductible, and at least for that one policy period have the benefit of a zero dollar deductible exposure with the insurance premium being rated for a $10,000 deductible.  This is part of the insurer’s policy there is no additional charge.

6.       “Donut Hole” Deductible—is another unique feature.  Yes it works in the same way as the “Medicare Donut Hole”.  This is offered by a few insurers as part of their policy.  With this feature, the insurer pays up to a certain amount, (for example up to $2500) for any attorney malpractice claim made and the firm is responsible for their deductible once this amount is exceeded either for claims expenses or indemnity payments.   Once the deductible is paid, then the insurer resumes handling claim costs, i.e. the “donut hole”. This is a nice feature that eliminates out of pocket expenses for very small nuisance claims.  As this is part of the insurer’s policy there is no additional charge.

Small law firms often find that the premium savings of carrying a high deductible will be small.   But as the size of the law firm grows so will the premium savings for carrying a higher deductible.  By using the options that are right for you, either individually or in conjunction with each other the Attorney Malpractice Insurance Policy can be tailored to balance the insurance costs with the ultimate claims exposure costs if one or more claims are made against the firm. 

Share |

No Comments

Post a Comment
Required (Not Displayed)

All comments are moderated and stripped of HTML.
Submission Validation
Change the CAPTCHA codeSpeak the CAPTCHA code
Enter the Validation Code from above.
NOTICE: This blog and website are made available by the publisher for educational and informational purposes only. It is not be used as a substitute for competent insurance, legal, or tax advice from a licensed professional in your state. By using this blog site you understand that there is no broker client relationship between you and the blog and website publisher.
Blog Archive
  • 2019
  • 2018
  • 2017
  • 2016
  • 2015
  • 2013
  • 2011

View Mobile Version