Value Is The Sum Of Many Factors
The economic downturn has caused many law firms to look for ways to cut their budgets. But for certain expenditures, including insurance, firms should think twice before trying to save a few dollars by switching carriers, or opting to go without insurance. The policy that seems like a deal today may end up costing lawyers much more in the long-term.
Rather than asking, “How much does it cost?” the more telling question is, “What do I get for my money?” Some questions law firms should ask are:
- Does the policy provide the broadest possible coverage?
- Has the company ever pulled out of the market?
- Is the carrier financially stable?
- Is the claims staff made up of lawyers with experience in malpractice claims?
- Will the carrier provide local counsel to defend my claim?
- Is the company a mutual company owned by its policyholders, or a stock company owned by shareholders?
- Does the carrier care about your market? Have they demonstrated a strong commitment?
Know your Malpractice Carrier
Mutual insurance companies have a history of putting policyholders first. With no shareholders, the focus is on long term goals of financial strength and stability, not quarterly profits. While only 1% of U.S. businesses have lasted for 100 years, the median age of mutual insurance companies is 120 years, and over 60% of mutual companies are more than 100 years old.
Is the carrier you are considering financially stable? Moreover, does its perceived stability stem from its own operations, or the generosity of its parent company? Some insurance companies appear financially sound because of the financial strength of their parent companies. However, if the parent company decides it will no longer support a failing subsidiary or line of business, you could be left without coverage.
A company’s size is not always indicative of its stability and quality. A true commitment is measured over the long-term. Many malpractice carriers move in and out of markets, sometimes by choice and sometimes because of financial or other issues. What would happen to your malpractice coverage should your carrier decide to pull out of your market? You could find that the coverage you paid for is not there when you need it.
When searching for the best rate, many firms overlook important differences in coverage. Unfortunately, it’s not until a claim hits that the effects of inadequate coverage become apparent.
Make sure you understand your Prior Acts Coverage. Prior Acts Coverage applies to claims arising from acts or omissions by an Insured occurring prior to the inception date of the Policy. Attorneys who are starting or changing firms may inadvertently reduce their Prior Acts Coverage, leaving a gap in coverage. Two common causes are retro-date exclusions (which limit coverage to acts or omissions occurring on or after the retro date), and policy language that limits coverage to legal services performed on behalf of the insured firm. If your new policy contains one or both of these restrictions, your Prior Acts Coverage is limited and your new policy does not cover your entire career. More information can be found in this article.
Other key features to understand and compare include:
- First Dollar Defense: With first dollar defense you pay your deductible only if there is an indemnity payment. The company pays your defense costs not to exceed the limits of liability. The Bar Plan offers First Dollar Defense as part of our standard policy, but this is not the norm.
- FDCPAclaims are common. Understand how your carrier handles Claims for Damages.
- Consent to Settle: Some carriers do not require the Insured’s Consent to Settle a Claim–the company has absolute discretion.
- Tail Coverage or Extended Reporting Coverage: This allows an attorney to extend the period of time they can report claims for acts, errors and omissions occurring during the Policy Period but first made and reported after the expiration date of the Policy.
When a claim does occur, who will handle that claim? Is your claims adjuster an attorney with experience in private practice? And when a lawsuit is filed against you, does the company provide experienced local counsel to defend you? When your reputation and livelihood are at stake, look for a carrier who understands the practice of law, with a proven track record of protecting lawyers.
In times when finances are tight, it is tempting to cut corners for short-term savings. Subject to underwriting guidelines, The Bar Plan covers lawyers for their career and does not limit coverage to services provided solely on behalf of your present employer as some policies do.
To start the application process, click here.