Travelers Insurance Choosing the Right Attorney Malpractice Insurance Deductible for You

Travelers Insurance 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.

The Travelers Insurance program offers the Following Deductible options:

1. 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.
2. 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.
3. 1^st 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.
4. Zero Dollar Deductible—with a zero dollar deductible the remaining options do not apply. With a Lawyers Professional Liability Insurance true zero dollar deductible option, the firm has no out-of-pocket deductible costs. Few malpractice insurers offer this option. This option does increase insurance premium costs.

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. Travelers Insurance policy language that deals with deductibles is as follows:

II.     SUPPLEMENTARY PAYMENTS

The Company will pay the following with respect to any Claim covered by this policy:

A. All expenses incurred by the Company, other than Defense Expenses.

B  All reasonable expenses incurred by the Insured at the Company’s request to investigate or defend a Claim, provided that the maximum amount available for loss of earnings for time taken off work will not exceed:

1. 1. $500 per Insured Person per day; and
   2. $15,000 per Policy Year for all Insured Persons.

C. The cost of bonds to release attachments that is within the applicable Professional Liability Coverage Limit, provided that the Company will not be the principal under any such bond and will not have any duty to furnish such bond.

D. All costs taxed against the Insured on that part of a judgment the Company pays.

E. The cost of any required appeal bond for that part of a judgment that is for Damages to which this policy applies, and that is within the applicable Professional Liability Coverage Limit, provided that:

1. 1. the Company consents to the appeal of such judgment; and
   2. the Company will not be the principal under any such bond and will not have any duty to furnish such bond.

Payment of amounts under section II. SUPPLEMENTARY PAYMENTS will not be subject to a Deductible and will not reduce the applicable Professional Liability Coverage Limits. If the Professional Services and Network and Information Security Offenses Coverage Limits are exhausted by the payment of amounts covered under this policy, the Company will have no further obligation to make payments under section II. SUPPLEMENTARY PAYMENTS.

VI.      CONDITIONS

C.      DEDUCTIBLE

The following is added to section I. DEDUCTIBLE of the Professional Liability Terms and Conditions:

If the Company and the first Named Insured agree to the final settlement of a Claim with the claimant during the initial voluntary mediation of that Claim or within 30 days after participation in such mediation, the first Named Insured’s Deductible obligation for such Claim will be reduced by 50% subject to a maximum reduction of $25,000. Deductible payments made prior to the application of the above credit will be reimbursed within 30 days of the resolution of the Claim. This reduction does not apply to any Claim resolved through voluntary or involuntary arbitration.

No Deductible will apply to Damages or Defense Expenses for Claims that result from the rendering of, or failure to render, pro-bono services in the Insured’s capacity as a lawyer.

These Professional Liability Terms and Conditions apply to the Professional Liability Coverage. If any provision in these Professional Liability Terms and Conditions is inconsistent with or in conflict with any provision of the Professional Liability Coverage, the provisions of the Professional Liability Coverage will control.

I.        DEDUCTIBLE

These Professional Liability Terms and Conditions apply to the Professional Liability Coverage. If any provision in these Professional Liability Terms and Conditions is inconsistent with or in conflict with any provision of the Professional Liability Coverage, the provisions of the Professional Liability Coverage will control.

The first Named Insured will bear uninsured the amount of any applicable Deductible.

The Company’s obligation to pay Damages and Defense Expenses applies only to the amount of Damages and Defense Expenses that are in excess of the applicable Deductible for each Claim amount set forth in ITEM 5 of the Declarations. The Company may, at its discretion, pay all or part of any Deductible amount on behalf of the first Named Insured, and in such event, the first Named Insured agrees to repay the Company any amounts so paid.

If ITEM 5 of the Declarations indicates that a Deductible applies for all Claims, the Insured’s obligation to pay Damages and Defense Expenses, for all Claims made during each Policy Year will not exceed the Deductible amount for all Claims set forth in ITEM 5 of the Declarations. If there is no Deductible amount shown for all Claims, the first Named Insured will be responsible for the each Claim amount for each and every Claim, without further regardless of how often it applies.

II.      LIMITS

B.     Additional Benefits Limits

1.           Crisis Event Expenses Limits

Regardless of the number of Crisis Events qualifying for Crisis Event Expenses, or the number of persons or entities who are Insureds:

a. the Company’s maximum limit for Crisis Event Expenses for each Crisis Event first occurring during the Policy Year will not exceed the Crisis Event Expenses Limits for each Crisis Event set forth in ITEM 6 of the Declarations; and

b . the Company’s maximum limit for Crisis Event Expenses for all Crisis Events first occurring during the Policy Year will not exceed the remaining Crisis Event Expenses Limit for all Crisis Events set forth in ITEM 6 of the Declarations.

2.      Disciplinary or Regulatory Proceeding Expenses Limits

Regardless of the number of Disciplinary or Regulatory Proceedings qualifying for Disciplinary or Regulatory Proceeding Expenses, or the number of persons or entities who are Insureds:

a. the Company’s maximum limit for Disciplinary or Regulatory Proceeding Expenses for each Disciplinary or Regulatory Proceeding first initiated during the Policy Year will not exceed the Disciplinary or Regulatory Proceeding Expenses Limits for each Disciplinary or Regulatory Proceeding set forth in ITEM 6 of the Declarations; and

b. the Company’s maximum limit for Disciplinary or Regulatory Proceeding Expenses for all Disciplinary or Regulatory Proceedings first initiated during the Policy Year will not exceed the remaining Disciplinary or Regulatory Proceeding Expenses Limit for all Disciplinary or Regulatory Proceedings set forth in ITEM 6 of the Declarations.

Payment of Crisis Event Expenses and Disciplinary or Regulatory Proceeding Expenses are not subject to a Deductible and do not reduce the applicable Professional Liability Coverage Limits.

VI.     PRE-CLAIM ASSISTANCE

At the Company’s discretion, the Company will pay Pre-Claim Expenses for a Potential Claim reported in accordance with section VIII. NOTICE OF POTENTIAL CLAIMS. Pre-Claim Expenses must be incurred prior to the date that any Claim is made based upon or arising out of such Potential Claim. Payment of Pre-Claim Expenses is not subject to a Deductible and does not reduce the applicable Professional Liability Coverage Limits. Once a Potential Claim becomes a Claim, Damages and Defenses Expenses that result from such Claim are subject to a Deductible and will reduce the applicable Professional Liability Coverage Limits.

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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