There are a number of things that need to be maintained if you switch professional liability insurance carriers. Some of those items are:
1. Make sure the effective date of the replacement policy matches the expiration date of your current coverage. By convention, all policies expire on 12:01am and new policies are all effective at 12:01am. So when you make sure that the expiration date matches the effective date, there is no overlap or gap in coverage. This gap can be trivial until a claim is reported on the day of expiration and the new policy is inforce the next day.
2. Make sure that the prior acts date is the same or equivalent on the new policy. With “claims made” coverage the policy that is on the risk at the time a claim is made is the policy that the claim will be settled under. Once your old policy has expired, it has no obligation to respond to claims made and reported after coverage expiration.
3. Make sure to report any incidents or potential claims that you might be aware of to your old carrier prior to the expiration date. This is true regardless of whether you are switching carriers or not. Generally the renewal policy excludes coverage for any issues that should have been reasonably known prior to the effective date of the replacement policy. “Prior Knowledge” is one of the leading causes for denial of coverage with attorney and accountant malpractice coverage.
4. Make sure that the limits of liability and deductible are the same. If not make sure that you are comfortable with the differences. If you are reducing limits or raising the deductible be aware that once the old coverage expires those coverages are gone. You will settle any claims, even if they happened in the past, on the policy form in force at the time the claim is made. This is “claims made” coverage.
5. If you had CEOL (Claims Expenses Outside the Limits), you likely will want CEOL in the future. An alternative to this may be higher limits.
6. If you had 1st dollar or a loss only deductible in the past, you likely will want to carry it in the future. Certain types of legal practices, ie family law, get more allegations of claims that are dismissed than other types of practices. If you have changed your practice to areas that do not get frequent unsubstantiated claims it may not be needed. But if your practice is switching to an area that has a high incident of false claims, you may want it now. Of course, malpractice insurance carriers, also know which areas of practice have frequent claim issues, and the carrier may not offer it for your areas of practice.
7. Even if you have not had an aggregate deductible in the past, an aggregate deductible is a worthwhile cost as it limits the amount you would pay on deductibles for any one policy year. More than one firm has run into circumstances that have caused them to report multiple claims in one year. This normally has happened when an attorney or employee stops working and no one realizes it until the deadlines are missed and the client has pointed it out. By then it is too late.
8. If your firm owns a title agency, you need to make sure that the title agency has coverage either independent of the law firms policy or combined with it.
These are just a few simple items that firms need to address when shopping for attorney or accountant malpractice insurance coverage.