Premium and the policy forms are important when selecting a professional liability insurance policy. But selecting the right malpractice insurer is paramount.
When selecting an insurer you should consider:
1. What is the AM Best Rating and malpractice insurer size? The financial stability of the insurer is very important. Any insurer with an AM Best rating less than A- (Excellent) or no AM Best rating should be approached with caution. Even an admitted insurer with an AM Best rating of less than A- could spell trouble if the insurer has to navigate troubled waters.
2. How long has the malpractice insurer been writing accountant and attorney malpractice Insurance? Certain programs managed by some Managing General Agencies (MGA) have a track record of changing malpractice insurers ever 3 to 5 years. Even if this program offers the “cheapest” price, approach with care. If your firm has a claim at the time that the MGA is switching insurers then your firm may end up in the surplus lines market paying much more than if you stayed with a stable program.
3. Remember these policies are claims-made. Just when you are about to exercise your right for a free retirement tail or extended reporting period endorsement (ERP or Tail), the program goes away leaving you with nothing. A past record is sometimes no guarantee of the future. One example is when AIG program withdrew from writing legal malpractice insurance many an attorney had expected a ‘free’ ERP at retirement but found they were out of luck after the program shut down.
4. Risk Retention Groups (RRG) are another entity that could be an issue. An RRG is only as good as the reinsurance that backs the program. For the purposes of state insurance guarantee funds an RRG is treated like a surplus lines insurer, there is no state guaranteed fund. If a RRG loses its 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.
5. Is the insurer admitted or non-admitted? While there are a number of very fine non-admitted malpractice insurers, it is important to be aware of the financial strength and track record of a non-admitted insurer. An experienced agent might also know about issues that an insurer 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 insurer. There is no insurance guarantee fund for a non-admitted insurer that goes out of business.
6. And if you happen to be an unlucky sole that has an ERP with a non-admitted insurer or a RRG that goes belly up, your ERP is worthless. You now have no coverage for your past acts with little recourse.
7. Does the insurer have a claims department that is dedicated to attorney and accountant malpractice insurance? Professional Liability Insurance claims are unique and you need staff with experience handling these claims.
8. What is the attitude of the insurer handling malpractice claims? Some insurers settle almost immediately settling. Other malpractice insurers 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.
9. Does the insurer have empaneled counsel in the state? Experience law firms that specialize in attorney and accountant malpractice defense are essential in settling claims properly. It is good practice to ask for a list of empaneled council in your state or locale. Having an inadequate defense can increase your insurance costs for years to come.
10. Does the insurer offer risk management services? Sometimes it is good to talk with an experienced malpractice attorney and bounce an issue off them. Getting proper advice at the right time can prevent an issue from turning into a malpractice claim.
11. And finally some insurers offer free CLE many don’t.
With malpractice insurance look beyond the policy price before deciding on whom to insure with. L Squared Insurance can help with answering the questions, so that you, the insured, can sleep at night. Remember malpractice insurance is sleep insurance.