Westfield Specialty 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.
Westfield Specialty’s program offers the Following Deductible (Retention) options:
- Per Claim Deductible (Retention)—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.
- 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.
- 1st 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.
The Lawyer Professional Liability (LPL) different deductible (retention) options may be part of the policy or provided as an additional charge. Depending on circumstances a firm may chose more than one deductible (Retention) option. The deductible options can be in the declarations page or via policy endorsement. The Westfield Specialty Policy policy language that deals with retention is as follows:
II. DEFENSE, COOPERATION, SETTLEMENT, EXHAUSTION OF LIMITS, AND ALLOCATION
D. Early Settlement
If the Insurer and the Named Insured agree to the final settlement of a Claim with the claimant within ninety (90) days of the date such Claim is first made, during the initial voluntary mediation of that Claim, or within thirty (30) days after participation in such mediation, the Retention applicable to such Claim will be reduced by fifty (50%) percent, subject to a maximum reduction of $25,000. Payments applicable to the Retention made by the Named Insured prior to the application of such reduction will be reimbursed within thirty (30) days of the resolution of the Claim. This reduction does not apply to any Claim resolved through voluntary or involuntary arbitration.
V. LIMITS OF LIABILITY AND RETENTION
D. Retention
(2) Item 4(A), Each Claim Retention, shall apply to each Claim until the aggregate payment by the Insureds for all Claims made during the Policy Period, or the applicable Extended Reporting Period, exceeds the Aggregate Retention set forth in Item 4(B) of the Declarations.
(3) No Retention shall apply to any Disciplinary Proceeding, Crisis Event, Potential Claim, subpoena for which the Insured seeks coverage under Section I.E., Subpoena Coverage, or coverage under Section I.F., Attendance at Trial.
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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Lee Norcross, MBA, CPCU
California License # 0D87292
L Squared Insurance Agency, LLC ® DBA in California as L2 L Squared Insurance Agency, License # 0L93416
Managing Director, CEO
Lee@L2Ins.com
616-726-7080
