Attorney Malpractice Insurers cap their exposure to losses through a variety of means. One is by limiting the limits an insurer will post for a single law firm. All attorney malpractice Insurers carry reinsurance helping to limit their exposure to “shock” losses. Reinsurers in their reinsurance treaties dictate to the primary insurer the firm types written under the treaty and the limits that the reinsurer will reinsure. The reinsurer also wants to limit their exposure to any type of “shock” loss so one primary insurer may need multiple reinsurers. This is just one way that all insurers spread the risk. So when your primary insurer tells you they cannot offer higher limits their hands may be tied by their reinsurance treaties.
If you have a personal or commercial umbrella insurance policy it will not cover your activities as an attorney. Umbrella policies specifically exclude attorney malpractice insurance coverage.
Some law firms also attempt to get another “primary” policy to increase their coverage limits. Generally if through the application process an attorney malpractice underwriter determines the firm has other “primary” coverage they decline to write. There are a variety of problems with having 2 primary attorney malpractice insurance policies covering the same exposure. The major problem is the “Other Insurance” clause commonly found in most policies. Having 2 primary malpractice policies may produce unexpected results at claim time. An insured could find out there are coverage gaps.
The following is an example from a Wesco Insurance Company form:
“E. Other Insurance
If there is other insurance that applies to the claim, this insurance shall be excess over such other valid and collectible insurance whether such insurance is stated to be primary, contributory, excess, contingent or otherwise. This does not apply to insurance that is purchased by the Named Insured specifically to apply in excess of this Policy.”
To increase your coverage, your best option is to get an “excess” Attorney Malpractice Insurance policy that is a “following form” policy. A “following form” Excess Attorney Malpractice Insurance will have language in it that basically states that this excess policy will follow the terms and conditions of the underlying primary coverage. It also has language in it to make sure that the “Other Insurance” clause in the underlying coverage is not triggered. This also helps reduce the chances of coverage gaps. Some law firms may have to get multiple excess insurance policies to get the liability coverage limits needed.
The cost of an excess policy varies. Much depends on the insurance history of the firm, areas of practice, the limits of the primary policy, and the needed excess limits.