Attorney Malpractice Insurers cap their loss exposure by limiting the liability limits for a given law firm. This is especially true for smaller law firms. For instance, if a solo practitioner pays $3000 for a $2million policy and has a ‘limits’ loss it takes hundreds of other firms without any losses just to break even. Not very realistic. This can destroy a program as there is not enough premium for this insurer to make up for this loss. This same insurer may be willing to offer a larger law firm higher limits because they are collecting $20,000 or more for a $2million policy limit. So, what is a firm to do?
A personal or commercial umbrella insurance policy will not cover your activities as an attorney. Umbrella policies specifically exclude work of an attorney. So, this is not an option.
A few law firms attempt to get another “primary” policy to increase their coverage limits. If through the application process an attorney malpractice underwriter determines that the firm has other “primary” coverage they decline to write. There are a variety of problems with having two primary attorney malpractice insurance policies covering the same law firm exposure. The major problem is the “Other Insurance” clause commonly found in most policies. Having two 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.”
Remember the Abbott & Costello baseball routine, “Who is on 1st”? If you have two policies with the same language, you can see the problem that this creates.
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 helps reduce the chances of coverage gaps. Some law firms may need multiple excess insurance policies to get the liability coverage limits required.
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, the needed excess limits, and the premium of the underlying coverage. Excess insurers will require coverage proof of the underlying insurance prior to issuing the excess policy.
As a specialist in attorney malpractice insurance coverage, L Square has access to insurers that write excess attorney malpractice insurance policies. Even is L Squared does not write your primary insurance coverage we can help with your excess coverage and get the limits you need.
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Lee Norcross, MBA, CPCU
Managing Director, CEO
(616) 940-1101 Ext. 7080