Policy premium and the policy forms are very important when selecting a Professional Liability Insurance policy. But there is much more that an Attorney or Accountant should be concerned about when selecting a malpractice insurance carrier.
A few of the items that you need to consider are:
1. What is the AM Best Rating and size of the Malpractice Insurance carrier? The financial stability of the insurance carrier is very important. Any Malpractice Insurance carrier with an AM Best rating of less than A- (Excellent) or no AM Best rating needs to be viewed with caution. Even if the carrier is admitted an AM Best rating of less than A- could spell trouble ahead if the carrier has a rough patch. The size of the carrier and the number of states writing malpractice insurance can also be important. The larger the insurance carrier and the more diverse distribution channel for attorney and accountant malpractice insurance, the less likely any one trend will have a material impact on the malpractice insurance program.
2. Another question is how long has the malpractice carrier been writing accountant and attorney malpractice Insurance? Certain programs managed by some Managing General Agencies (MGA) have a track record of changing Malpractice Insurance Carriers ever 3 to 5 years. Even if this program offers the “cheapest” price, approach these programs with care. If your firm has a claim at the time that the MGA is switching insurance carriers then you may find that your firm ends up in the Surplus Lines Market paying much more than you would had you stayed with a program that has a long track record. Continuation of insurance carrier programs are also important if the carrier offers a non-practicing Extended Reporting Period Endorsement (ERP or Tail). Just when you are about to exercise this option, the program goes away leaving you with nothing. The caveat to this is that even if the program has a long track record and the carrier is a well-known carrier, things do change. A past record is not a guarantee of the future. An example of this is the AIG program for lawyers that stopped writing business recently, any attorney that had been planning to retire with a free Extended Reporting Period Endorsement after the program shut down was out of luck.
3. Risk Retention Groups are another entity that could be an issue. A risk retention group is only as good as the reinsurance that backs the program. For the purposes of state insurance guarantee funds they are treated like a surplus lines carrier, there is no state guaranteed fund. If a risk retention group loses it's reinsurers, the program can disappear in a heartbeat. This has happened in the past, and when it does it leaves firms suddenly with no malpractice insurance coverage and little to no help from your state insurance department.
4. Is the Malpractice Insurance carrier admitted or non-admitted? While there are a number of very fine non-admitted malpractice insurance carriers, it is important to be aware of the financial strength and track record of a non-admitted carrier. An experienced agent might also know about issues that a carrier may be having that are not always directly reflected in the current financial ratings, be it underwriting or claims service. Remember that your state insurance department can be of little help if you have a dispute with a non-admitted insurance carrier. There is no insurance guarantee fund for a non-admitted insurance carrier that goes out of business.
5. Does the malpractice insurance carrier have a claims department that is dedicated to attorney and accountant malpractice insurance? Professional Liability Insurance claims are unique and you need people with experience handling these claims.
6. What is the track record for the carrier in handling malpractice claims? Some carriers will give up almost immediately settling the claim. Other malpractice insurance carriers are at the opposite end of the spectrum never wanting to settle and will fight to the death. Make sure you are comfortable with the claims department’s mentality for settling claims.
7. Does the Malpractice Insurance Carrier have empaneled counsel in the state? Experience law firms that specialize in attorney and accountant malpractice defense are essential to making sure that a claim is settled properly. It is good practice to ask for a list of council in your state or locale. The cost of have having inadequate defense can increase your insurance costs for years to come.
8. Does the Malpractice Insurance Carrier offer risk management services? Sometimes it is just good to talk with an experienced malpractice attorney and bounce an issue off them. In some cases just getting proper advice at the right time can prevent an issue from turning into a malpractice claim.
With Malpractice Insurance it is very important to look beyond just the price of the policy before deciding on who to insure with. L Squared Insurance can help with answering the above questions, so that you, the insured, can make an informed decision.