The reality of attorney malpractice insurance policies is paying the deductible when a claim is made against the law firm. For an additional premium Insurers may offer for 1st dollar defense which addresses claims expenses for claims with no indemnity payment made or an aggregate deductible for multiple claims brought in any one policy year. But insurers may also have features built into their policies that reduce your deductible obligation. Valuable policy features mean that there is more than policy premiums that should be compared prior to making an insurer coverage decision. As every law firm is unique, policy features important to one insured are not important to another insured.
Deductible reducing features with the Freedom Specialty policy are:
I. INSURING AGREEMENT
B. Defense and Settlement:
We have the right and duty to defend, subject to and as part of the Limits of Liability, any claim made against you during the policy period and reported in writing to us during the policy period or, if applicable, the extended reporting period pursuant to the terms of this policy for any actual or alleged covered act for which coverage is afforded under this policy, even if any of the allegations of the claim are groundless, false, or fraudulent.
We have the right to make any investigation we deem necessary with respect to any claim or notice of a covered act under this policy. We have the right to make, with your written consent or the consent of your designee, any settlement of a claim under this policy.
In all events, we will not be obligated to settle any claim, pay any loss, or undertake or continue defense of any claim after the applicable limit of liability has been exhausted by settlement of any claim or payment of any loss. In each such case, we will have the right to withdraw from the further
defense of the claim by tendering control of the defense to you.
You will not, except at your own cost, admit or assume any liability, settle any claim or incur any costs in connection with a claim without our written consent.
We shall not settle any claim without your consent, such consent shall not be unreasonably withheld. If, however, you refuse to consent to any settlement recommendation made by us and acceptable to the claimant, then, subject to the Limits of Liability set forth in Item 3. of the Declarations,
our liability for damages and defense costs relating to that claim shall not exceed:
1. the amount for which the claim could have been settled plus all defense costs incurred up to the date the Insurer made its recommendation (the “Settlement Amount”); plus,
2. Fifty percent (50%) of any damages and/or defense costs in excess of the Settlement Amount incurred in connection with such claim.
The remaining fifty percent (50%) of damages and/or defense costs in excess of the Settlement Amount will be your responsibility and uninsured.
If you refuse to settle as described above, once the total damages and defense costs equal the amount calculated as set forth above, we shall have the right to withdraw from the further investigation and defense thereof by tendering control of such investigation or defense to you and you
agree, as a condition of the issuance of this policy, to accept such tender and proceed solely at its own cost and expense.
If you have not paid premiums or retentions which are due, we have the right, but not the obligation, to settle any claim without your consent.
II. LIMITS OF LIABILITY AND DEDUCTIBLE
B. DEDUCTIBLE
This policy will pay only that part of the loss which exceeds the deductible amount(s) stated in Item 4.a., or Item 4.b., of the Declarations, such deductible amount(s) to be borne by you and will remain uninsured. The deductible amount stated in the Declarations as each claim or aggregate or both is described
below:
1. EACH CLAIM
The each claim deductible amount stated in Item 4.a. of the Declarations, if any, is the amount for which you are responsible with respect to loss arising from each claim.
2. AGGREGATE
The aggregate deductible amount stated in Item 4.b. of the Declarations, if any, is the amount for which you are responsible with respect to loss arising from all claims, in the aggregate, under this policy.
A single deductible amount will apply to loss arising from all claims alleging the same covered act or interrelated covered acts.
Our obligation to pay loss, including defense costs, in connection with any claim will only be in excess of the deductible, the amount of which must be borne by you at your own expense. We will have no obligation whatsoever, either to you or to any other person or law firm, to pay all or any portion of the deductible on your behalf. We will, however, at our sole discretion, have the right and option to do so; in which event you will repay to us any amounts so paid.
III. CLAIM MITIGATION
Subject to the conditions described therein, your deductible obligation may be subject to one of the following:
A. In the event a claim is fully and finally resolved to the satisfaction of all parties, including us, as a result of alternative dispute resolution in a form acceptable to us, without resorting to litigation, we will waive your deductible obligation for such claim.
B. If within one year of being reported, or being deemed to have been made, in accordance with CONDITIONS VI.C. of this policy, a claim is fully and finally resolved to the satisfaction of all parties, including us, and all loss and defense costs arising from such claim have been paid, your deductible obligation for such claim shall be reduced by twenty-five percent (25%) up to a maximum reduction of $25,000.
C. If a claim arises from an assignment in which you used an engagement letter containing a limitation of liability clause and mediation clauses in a form approved by us that was signed prior to the covered act being committed, your deductible obligation for such claim shall be reduced by fifty percent (50%) up to a maximum reduction of $10,000 each claim, and $25,000 in the aggregate for the policy period.
D. If we recommend a settlement within the applicable limit of liability which is acceptable to the claimant, and you or your designee consent to such settlement within forty-five (45) days of our recommendation or within the time permitted by the claimant to accept the claimant’s demand, whichever is less, then your deductible obligation for such claim shall be reduced by twenty-five percent (25%) up to a maximum reduction of $25,000. We will reimburse you for the difference between the deductible amount previously paid in connection with the claim and the amount of the reduced deductible.
If, however, you or your designee does not consent to the settlement of the claim within the time frame described above, the deductible will remain at the amount set forth in Item 4. of the Declarations, even if consent is given to a subsequent settlement of such claim.
The maximum amount of the reduction in your deductible obligation in respect to A., B., C. or D. above shall be $50,000 for the policy period.
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This blog is an excerpt from the policy. The complete policy along with applicable endorsements could impact the information provided above.
Lee Norcross, MBA, CPCU
Managing Director, CEO
(616) 940-1101 Ext. 7080