As the New Year approaches this seems to the time of year that attorneys getting close to retiring start thinking about hanging up their shingles. Generally their income starts to drop and they start looking for ways to save money. One of the quickest ways appears to be shopping the attorney malpractice insurance in hopes of getting a cheaper rate. Remember that attorney malpractice insurance is written on a claims-made basis and when you stop the insurance coverage, so stops your prior acts coverage. Many insurers offer a ‘free’ retirement tail (non-practicing ERP) if you have been with an insurer long enough to qualify for it.
It is not always in the best interests of a solo attorney to switch attorney malpractice insurers if they are close to retirement. The savings of a couple of hundred dollars could cost them thousands of dollars later. See the following attorney's inquiry and L Squared's response:
E-mail from attorney
I received your inquiry regarding lawyer's professional liability insurance some time ago. I recently went through a renewal of my policy with Wesco Insurance Company. I have been with this company for many years and they have always seemed to treat me well. Recently, however, I see insurance premiums that do not seem appropriate, compatible or reasonable. I’m interested in finding out more information about your lawyer’s professional liability insurance, including prior acts coverage. I will not be making any changes until approximately this time next year but I do not want to wait until the last minute to get things in order if I determine to make a change in coverage.
Any information that you could provide to me would be greatly appreciated.
Thank you.
Response from L Squared Insurance Agency:
Thank you for your inquiry about possibly getting a quote for your professional liability insurance. There is really not much information that we can provide until we get closer to your expiration date as most insurers we work with normally will not quote until we are closer to your expiration date.
In looking at your information on the state bar website, I note that you might be getting close to retirement. Many malpractice insurers offer ‘free’ retirement or non-practicing Extended Reporting Period Endorsement (ERP) for an attorney that has been with the same insurer for a set number of years. You might well have already qualified for that option with Wesco. If you switch to a new insurer, you likely will need to spend at least 3 to 5 years with that new insurer to qualify for the “free” non-practicing Tail or ERP. Note that if you do switch to a different insurer, you would still have the right to purchase an ERP from that new insurer, but it can cost 3 to 5 times the inforce premium and you will lose the right to receive the non-practicing ERP from Wesco.
While we always like to write new business, your situation may not be one where it would be in your best interests to switch attorney malpractice insurers.
If you still would like to get a quote near your expiration date, we would need our indication form completed and sent back. With this we can provide you a quote at around 30 days prior to expiration. Or as an alternative, just let us know your policy expiration date and we can contact you closer to that date.