Changing SeasonsYou are very happy as it appears that your new policy is going to save you money.  But as with the changing seasons there are certain things you want to check when you switch claims-made malpractice insurers.  Items to check:

1.       Check the named insured and who is insured. 

2.       Make sure the effective date of the replacement policy matches the expiration date of your current coverage.  By convention, all policies expire on 12:01am and new policies are all effective at 12:01am.  When the expiration date matches the effective date, there is no overlap or gap in coverage.  A gap can be trivial unless a claim is reported on the day of expiration and the new policy is inforce the next day.

3.       Make sure that the prior acts date is the same or equivalent on the new policy.  With ‘claims- made’ coverage the insurer that is on the risk at the time a claim is made is the insurer that the claim will be settled with.  Once your old policy has expired, the old insurer has no obligation to respond to claims made and reported after the coverage expiration date.  Shortening up the prior acts date likely will cause coverage gaps.

4.       Report any incidents or potential claims that you might be aware of to your old insurer prior to the expiration date.  Renewal policies exclude coverage for any issues that should have been reasonably known prior to the effective date of the replacement policy.  ‘Prior Knowledge’ is a leading cause for coverage denial with claims-made insurance.

5.       The liability limits and deductible should be the same.  If not make sure that you are comfortable with the differences.  If you are reducing limits or raising the deductible be aware that once the old coverage expires those coverages are gone.  You will settle any future reported claims, even if they happened in the past, on the policy form in force at the time the claim is made.  This is claims-made coverage.

6.       If you had CEOL (Claims Expenses Outside the Limits), you likely will want CEOL in the future.   An alternative to this may be higher limits.

7.       If you had 1st dollar or a Loss Only Deductible, you likely will want to carry it in the future.  For example certain types of legal practices such as family law get more allegations of claims that are dismissed than other practice areas.  If you have changed your practice to areas that do not get frequent unsubstantiated claims it may not be needed.  But if your practice is switching to an area that has a high claims frequency you may want it now.  Of course, malpractice insurers also know which practice areas have frequent claim issues, and the insurer may not offer it.

8.       Even if you have not had an aggregate deductible in the past, an aggregate deductible is a worthwhile additional expense as it limits the amount you would pay on deductibles for any one policy year.  More than one firm has run into circumstances that have caused them to report multiple claims in one policy year.  By then it is too late.

9.       Check policy definitions, exclusions and the insuring agreement to verify that you have equivalent coverage.  For instance the definitions of damages may exclude punitive damages in one policy and not exclude them in another.  

10.   Check your policy endorsements.  For instance a firm may own an entity that is named on the old policy but not named on the new policy.

Checking these 10 items will help prevent coverage gaps when changing insurers.

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