I hate this discussion with attorneys. As with many things in life there is no right answer. Everyone likes ‘free’. But ‘free’ does not always mean that there are no strings attached. Attorney Malpractice Insurance for solo practitioners ‘free’ retirement tail can be a great benefit. In most attorney malpractice insurance policies the retirement ‘tail’ is often referred to as a non-practicing extended reporting period endorsement (ERP). A no cost non-practicing ERP can save an attorney that is closing his or her practice many of thousands of dollars. If the attorney is truly retiring from the practice of law this is a great benefit and a loyalty reward for staying with the same insurer for a number of years.
But a non-practicing ERP can also be a costly mistake for the attorney that is closing a private practice to become a Judge, work in the government or private sector in a non-private practice lawyer capacity and still has many years of work left in a career. Here is why.
If the attorney is truly not going to be going back into private practice at a later date, no problem. The non-practicing ERP makes total sense. But for the attorney that for whatever reason goes back into private practice at a later date, this decision can cost the attorney the past acts coverage that was afforded to the attorney via the non-practicing ERP.
This is the Traveler Insurance Lawyers Professional Liability Insurance ERP Language for Retirement, Death & Disability:
It is agreed that:
The following is added to section VI. CONDITIONS:
OPTION TO REQUEST A NAMED INDIVIDUAL EXTENDED REPORTING PERIOD ENDORSEMENT
1. If during the Policy Period any Insured Person:
a. becomes disabled and permanently ceases performance of Professional Services;
b. retires and permanently ceases performance of Professional Services; or
such Insured Person or the Named Insured, or the Insured Person’s executor or estate may request a Named Individual Extended Reporting Period Endorsement that will apply to such Insured Person.
Coverage under the Named Individual Extended Reporting Period Endorsement will end if such Insured Person resumes performing Professional Services, recovers from their permanent disability, or the executor or administrator is discharged after their death.
2. Any request for such endorsement must:
a. be made in writing to the Company during the same Policy Period or Policy Year that the Insured Person became disabled, retired, or died, or within 60 days of the ending date of such Policy Period or Policy Year; and
b. include evidence of such disability, retirement, or death.
3 The Named Individual Extended Reporting Period Endorsement will not apply to:
a. Claims made while this policy is in force, any successive renewal of this policy is in force, or any extended reporting period that applies to this policy or any renewal of this policy is in force; or
b. Claims if any other insurance applies to the Claim.
4. The limits of liability applicable to any Claim covered under such endorsement will be shared by all Insured Persons who qualify for such an endorsement in a Policy Year.
5. There is no charge for the Named Individual Extended Reporting Period Endorsement for eligible Insured Persons who become disabled during the Policy Period and who permanently cease performance of Professional Services, or die.
The charge for the Named Individual Extended Reporting Period Endorsement for eligible Insured Persons who retire during the Policy Period is $1,500 per Insured Person named in the endorsement. However, if the Named Insured has been continuously insured by the Company, or any of its affiliated insurance companies, for at least three years, no charge will be made for the endorsement.at least three years, no charge will be made for the endorsement.
This is a good deal for the attorney that permanently retires. But let’s say that for whatever reason the attorney goes back into private practice. What happens to the attorney’s past acts coverage? With most insurers, going back into private practice voids the ERP. This could potentially expose the attorney to uninsured past acts and the potential of uninsured claims.
A very difficult decision for the attorney is whether to take the ‘free’ retirement tail or bite the bullet and pay the cost of an ERP that does not go away if the attorney returns to private practice. The decision to go with the ‘free’ ERP or the ‘paid’ ERP must be made within 30 to 60 days of the coverage termination date. Once made it cannot be undone. So what does the crystal ball show for the future?
Remember, no two attorney malpractice policies are the same. Before you decide which path to take it is important to read the relevant sections of your Attorney Malpractice policy and get a sample copy of the ERP endorsement language that would be attached to your policy.