An attorney malpractice claim resulted in a loss of over $200,000. Unfortunately, the insured only had a policy limit of $100,000 per claim. The insurer wrote their check for $100,000 and closed their claim file. It left the insured to defend themselves and settle the balance owed on any additional amount due.
The insured had been carrying a $500,000 policy limit but to save money reduced that policy limit the year before the claim was made against the insured. So even though the insured had coverage of $500,000 when the claim occurred, the firm now had $100,000 per claim limit. This is because being a claims-made policy, the claim was settled on the policy form under which the claim was reported.
The end result is that for saving a few hundred dollars at renewal, the insured is now faced continuing to provide themselves with a defense and is responsible for possibly over $100,000 of damages.
It is very important to make sure that you as an insured have the proper per claim policy limit so that you do not face this problem. When determining what policy limit you need make sure to look at your most expensive case and if you were to make a mistake how much could that cost. Insured for the worst-case scenario not an average cost of claims that could be made against you. And with claims-made coverage it is not just your current cases but the cases that you've handled in the past that can come back to haunt you.
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Lee Norcross, MBA, CPCU
Managing Director, CEO
(616) 940-1101 Ext. 7080