Frequently Asked Questions
I am shopping for a competitively priced malpractice insurance policy. Are all policies the same?
No. There are many differences in the coverage offered under lawyers professional liability policies. Although premium is an important factor to consider when choosing your malpractice insurance policy, the overall coverage and financial strength of the insurance carrier should also be examined. Although it’s tempting to choose the policy that offers the lowest price, it may not provide the greatest protection and value for your firm.
I recently renewed my lawyers’ professional liability insurance policy and learned from a colleague that he paid a lot less for more coverage from another company. Can I cancel my current policy and buy a policy from another carrier?
Yes, but it usually not advisable. Changing carriers in the middle of a term may result in a gap in coverage or additional expense incurred to insure continuous coverage. However, The Hartford offers a Spectrum businessowner’s and lawyers professional liability insurance policy that is an excellent option for small general practice firms looking for big savings prior to the expiration of their current policy. To learn more about The Hartford Spectrum policy and whether it is a good option for your firm, contact an Intelisure representative. We can also advise you as to the best time to begin shopping for malpractice insurance.
What is a “claims made and reported” policy?
An insurance policy provides coverage for a specified period of time between the effective date and expiration date. Professional liability policies provide coverage for claims that occurred and are reported subsequent to the retroactive date and prior to the expiration date (or end of the extended reporting period) of the policy.
What is the retroactive date and where do I find it?
The retroactive date is the date from which your carrier has agreed to provide coverage for any claims made under the policy. Typically, the insured has maintained continuous professional liability insurance from the retroactive date through the expiration date of the current policy. The retroactive date is usually found on the Declarations Page of your policy. Some policies include a “prior acts limitation endorsement” that identifies the retroactive date for an individual lawyer or for the firm. When examining a proposal for lawyers’ professional liability insurance, it is important to make sure that the policy offered includes prior acts coverage back to the retroactive date of your current policy.
What is prior acts coverage?
This is the coverage that is provided for claims made and reported (1) subsequent to the retroactive date of your policy and (2) prior to the effective date of your new policy. With the exception of The Hartford Spectrum policy, a firm must apply for a new lawyers’ professional liability each year. The new policy, whether from your current carrier or a new carrier, includes prior acts coverage as long as your firm has not experienced any lapse in coverage due to nonpayment, nonrenewal or cancellation.
What is a tail policy or Extended Reporting Endorsement (ERE)?
Professional liability policies have “a long tail.” This means that a significant amount of time can pass between the date of an alleged act of negligence and the date the claim is reported. A tail policy or extended reporting endorsement provides a period of time subsequent to the end of a policy period when the insured may report a claim that arose out of an error or omission that occurred during a prior policy period. The tail policy does not provide coverage for claims arising out of professional services provided subsequent to the expiration period of the last policy in effect.
Do I need to buy a tail policy?
It is not necessary to purchase a tail policy when you switch carriers if your new policy includes prior acts coverage. If your insurance company has declined to renew your insurance because of a poor claims history, a new carrier may decline to offer prior acts coverage. In this case, you should buy a tail policy from the insurance company that has declined to renew. If you leave the private practice of law, you should buy a tail policy from your current carrier to cover any potential claims.
Why are there two numbers such as $1,000,000/$1,000,000 on my policy?
The first number refers to the maximum limit of coverage per claim. The second number refers to the aggregate or total limit of coverage for all claims for the year.
What limits should I choose?
To prevail on a legal malpractice claim, the claimant must prove that “but for the lawyer’s negligence” the claimant would not have incurred a financial loss or damages. The law firm’s exposure to a potential claim is equivalent to the maximum damages a client (or third party who reasonably relied on the lawyer’s professional services) would incur as a result of a lawyer’s negligence. Typically, legal expenses and costs associated with defending a claim are applied to the limits and reduce the coverage available for damages. The policy limit per claim should be comparable to the firm’s maximum exposure including the cost of defending a claim. If a claim for damages exceeds the available limits under the policy, the insurance carrier may tender limits and leave the insured firm exposed to an excess judgment for damages.
What does “defense outside the limits” mean?
Some carriers offer the benefit of having defense costs paid outside the limits of the policy. Depending on the policy, it is sometimes more cost effective to simply increase the overall limits on the policy rather than pay for defense outside the limits coverage.
What is an aggregate deductible?
An aggregate deductible is the total deductible that a law firm will pay for multiple claims reported during the policy period. Some carriers offer this option for an additional premium. Under most policies, the insured will pay a separate deductible for each claim.
How can I get the best value and lowest premium when shopping for malpractice insurance?
Work with an independent agency, such as L Squared Insurance, that specializes in lawyers’ professional liability insurance.