Westport Insurance Choosing the Right Attorney Malpractice Insurance Deductible for You

Westport 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.

Westport Insurance’s 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.

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. The Westport Policy policy language that deals with deductibles is as follows:

II. SUPPLEMENTAL PAYMENTS

Please read policy for terms, conditions, that coverage limits for each supplemental payment

A. Disciplinary Proceedings – No Deductible 

B. Data Breach – $1,000 Deductible

C. Subpoena – No Deductible

D. Potential Claim Assistance – No Deductible

E. Crisis Event Expenses – No Deductible

V. CONDITIONS

C.       DEFENSE, INVESTIGATION AND SETTLEMENT OF CLAIMS

As respects such insurance as is afforded by this POLICY:

1. 3. the Company shall reimburse up to $500 to each INSURED for each day for his or her attendance at the Company’s request at trial, court-imposed hearing or arbitration proceeding involving a CLAIM, but the total amount so payable for all INSUREDS shall not exceed $15,000 per CLAIM. The deductible shall not apply to this Section V. CONDITIONS C.3. However, any payments made by the Company under this Section V. CONDITIONS C.3 shall be included within the applicable limit of liability and not in addition thereto.

F.      DEDUCTIBLE

The deductible, as stated in the Declarations, shall apply to each CLAIM and shall be paid by the NAMED INSURED. The deductible shall be first applied to all CLAIMS EXPENSES with the remainder, if any, being applied to LOSS. CLAIMS EXPENSES shall be included within the deductible and the limit of liability and not in addition thereto. Payment of the deductible shall be made by the NAMED INSURED within thirty (30) days of receipt of demand by the Company.

The deductible, as stated in the Declarations, will be reduced by 50% for any CLAIM if any INSURED delivered a written communication to the identified client(s) prior to the commencement of legal services for the specific matter that forms the basis of the CLAIM and the written communication was timely countersigned and returned to the INSURED, provided that the written communication contains all of the following:

1. 1. a clear and accurate identification of the client(s)
   2. a detailed description of the scope of the services to be rendered
   3. any activities excluded from the scope of engagement
   4. the fees for service
   5. specifics of any client responsibilities
   6. any written statement required by the Rules of Professional Conduct

A written communication that refers to a general engagement and not a specific task/service/matter will not qualify for this deductible reduction. The services detailed in the written communication must be related to the CLAIM. If the scope of the engagement changes, the INSURED must have communicated the change in scope to the client(s) in writing at the time the parties agreed to the change in scope. The reduction in deductible applies to per claim deductibles and aggregate deductibles. If the INSURED has paid more than 50% of the deductible, the Company will reimburse the INSURED the amount paid in excess of 50% of the deductible within sixty (60) days of receipt by the Company of written request by the INSURED.

No deductible shall apply to any CLAIM that results from eleemosynary PROFESSIONAL SERVICES.

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