QBE 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.
QBE 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.
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. QBE policy language that deals with deductibles is as follows:
II. EXTENSIONS OF COVERAGE
Extensions of coverage include Disciplinary coverage; Loss of Earnings for presence in hearings and arbitration meetings, Appeal bonds, Crisis Event Expenses, Pre-claim assistance, Subpoena assistance. To see what is covered under these headings a reading of the policy is necessary.
Solely with respect to the extensions of coverage described in this Section II, amounts paid by the Insurer shall not reduce the Limits of Liability stated in Item 3 of the Declarations and the Insureds shall not be required to pay the Deductible stated in Item 4 of the Declarations. With respect to Pre-Claim Expenses, once a Potential Claim becomes a Claim, Damages and Claim Expenses that result from such Claim shall reduce the Limits of Liability and are subject to the Deductible. If the Limit of Liability is exhausted by the payment of amounts covered under this Policy, the Insurer will have no further obligation to make payments under this Section II.
V. LIMIT OF LIABILITY AND DEDUCTIBLE
C. In the event a Claim is insured by another policy provided to the Insured(s) by the Insurer or any of its parents, subsidiaries or affiliated companies, then the Insurer’s Limit of Liability for all Damages and Claim Expenses under this Policy, as respects any such Claim, shall be reduced by any amounts paid or payable under such other insurance policy. The most the Insurer will pay is the highest available limit of liability that applies to such Claim under such policies, provided that this provision does not apply if the other insurance is umbrella or excess insurance that the Insured purchased specifically to apply in excess of the applicable Limits of Liability under this policy. Also in such event, a single Deductible shall apply which shall be the largest under the policies implicated and shall be the obligation of the Insured(s) jointly.
E. The Insurer shall only be liable for that part of covered Damages and Claim Expenses resulting from each Claim both first made against any Insured and reported in writing to the Insurer during the Policy Period, or any Extended Reporting Period, if applicable, that is in excess of the Deductible stated in Item 4 in the Declarations. The Deductible shall be the obligation of the Insured(s) jointly.
F. No Deductible will apply to Damages or Claim Expenses for Claims that result from the rendering of, or failure to render, pro-bono services in the Insured’s capacity as a lawyer.
VI. DEFENSE, INDEMNIFICATION AND COOPERATION
D. If the Insurer and the Named Insured agree to the final settlement of a Claim with the claimant during the initial voluntary mediation of that Claim or within thirty (30) days after participation in such mediation, the Named Insured’s Deductible obligation for such Claim will be reduced by fifty (50%) percent subject to a maximum reduction of $25,000. Deductible payments made by the Named Insured prior to the application of the above credit will be reimbursed within thirty (30) days of the resolution of the Claim. This reduction does not apply to any Claim resolved through voluntary or involuntary arbitration.
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
