When is the last time you read through your professional liability insurance policy? Do you really understand what’s covered and what isn’t? As is often said, the worst time to read your policy is when you have a claim.
Simply having a legal malpractice policy in place doesn’t necessarily mean you’re adequately protected from potential claims. Don’t be taken by surprise; read your policy with the following questions in mind. If you don’t like the answers you find, it may be time to shop for a new errors and omissions policy.
Am I protected against claims outside the current coverage period?
It’s important to make sure you have an appropriate combination of prior acts and tail coverages to avoid any gaps in your professional liability protection.
If you’re a new attorney just beginning practice, you don’t need to worry about having coverage for prior acts (because there are none).
If you’re an experienced attorney and you move your coverage to another insurance carrier (because of a job change or any other reason), be sure you understand how your new policy will handle claims that arise from events that occurred during a previous policy period but are made after it ended.
For example, imagine you didn’t realize that you made an error that resulted in a client loss, and then your policy ends and you get a new one. Will your new policy take care of the eventual claim? It’s important to make sure your new policy includes adequate coverage for prior acts. If not, you should purchase tail coverage, which is offered in your previous policy.
Talk to your agent to clarify any questions you have about your policy’s tail and/or retroactive coverage. Bear in mind that even if a firm that previously employed you carries tail coverage, it may cover only the firm’s liability and not your own.
What are my coverage limits, and how do they apply?
The amount of coverage you need depends heavily upon your area of practice. Some areas of practice leave attorneys open to much higher levels of malpractice liability than others, so make sure your policy limits are appropriate to the types of law you’re practicing.
If you’ve recently branched out to new practice areas, be sure to touch base with your agent or underwriter to make sure your policy covers your new areas of practice and your coverage is still sufficient.
Aside from the dollar amount of your coverage limits, it’s essential to understand how those limits will be applied to claims. Ask these questions:
- When does the limit begin to erode? Some policies count all defense costs against the coverage limit, while others may designate an additional, separate limit solely for payment of defense costs. Because the cost of malpractice defense can be high, this is a critical difference that you should fully understand.
- How much of the limit applies to each claim, and what is the annual total? How much is available for multiple payouts related to similar claims within a reporting period?
Does the policy cover claims that don’t become lawsuits?
This is another important difference among policies. Professional complaints can damage your reputation and result in fines, and defending against them can be costly. It’s easy (and free) for clients to file professional complaints against attorneys, so they are much more likely than lawsuits. Be sure you understand whether your policy will provide and pay for counsel to help you defend against these types of claims.
Who would be defending my claims?
This is an extremely important question to ask because it can give you insight into how effective you can expect your defense to be. If your insurer doesn’t hire experienced, competent malpractice defense lawyers, then your insurer can’t provide the same level of protection as one that does.
A competent defense is a basic benefit your policy should provide; if your insurer is trying to save money by hiring less experienced attorneys, then that basic benefit may be of limited value. If your insurer settles your claim for more than it needs to or loses your case in court, these missteps will follow you beyond the term of your insurance policy, damaging your professional reputation and likely resulting in higher malpractice premiums in the future.
If you’re interested in exploring your choices in legal malpractice insurance, contact ProDefender at (866) 434-8557. Our knowledgeable agents can help you understand the differences among policies and select one that provides the protection you need with premiums you can afford.