The insurance marketplace is competitive and it is easy to be confused by policy terms when comparing one insurance policy to another. There are important differences among insurance policies, and some are very significant. Getting the best “deal” or going with the cheapest policy is not always the best option, and may end up costing your firm more money in the long run.
The following key features protect you in your everyday practice of law.
Prior Acts is coverage that provides protection for legal services performed by the Insured prior to the inception date of the policy. This is important to consider because a recent study showed 85% of lawyers will change jobs at least once during their career and 50% will change at least twice.
The Bar Plan offers full prior acts coverage for the entire career of the insured attorney, which generally goes all the way back to the date the attorney was sworn in if the attorney has been continuously insured since that time.
Most other carriers limit the prior acts coverage to work done on behalf of the current insured firm. Any work the attorney may have done for a previous firm may not be covered.
To ensure you have sufficient coverage, refer to your policy’s definition of “Insured,” “Professional Services,” or “Legal Services,” or the “Coverage” section. Many policies state they only provide coverage “while providing professional services on behalf of the Named Insured or predecessor firm(s)” or “while acting on behalf of the Named Insured for clients of the Named Insured.” This means you only have coverage for services provided to clients of the “Named Insured,” which is the firm for whom you are currently working. This leaves your prior work, while employed at another firm, vulnerable to future liability.
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 limits of liability. If your policy states the deductible applies to indemnity and expense payments your deductible applies to the first dollar that is spent by the company for defense or settlement of the claim.
The Bar Plan offers First Dollar Defense as part of our standard policy. Most other carriers only offer First Dollar Defense by endorsement and for an additional premium.
Claims arising under the FDCPA are a common cause of claims for any area of practice. The statutory penalty is $1,000 per violation and Attorneys fees are also recoverable under the Act.
The Bar Plan carves back in a Claim for Damages arising under 15 U.S.C. Section 1692k(a) under the FDCPA.
The vast majority of Lawyer’s Malpractice Policies exclude fines, penalties, restitution, sanctions, costs, expenses or fees imposed under state or federal statutes or rules of procedure from the definition of “Damages.” Therefore, statutory fines and penalties under the FDCPA are not covered Damages.
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 reported AFTER the expiration date of the Policy. Your new firm may not want to provide coverage for your acts, errors and omissions prior to you joining their firm. They may require you to get a Retro Date on your policy that starts coverage from the date you join the firm forward. Or your new firm may have a policy that limits your prior acts to only work done “on behalf of the Policyholder.” If your previous firm ceases to remain in existence or ceases to be continuously insured, you have no coverage for your prior acts, errors or omissions.
The majority of insurance carriers do not allow insureds to purchase individual tail coverage when they move from one firm to another. The Bar Plan does to ensure you are protected for the entirety of your legal career.
Consent to Settlement
Some carriers do not require the Insured’s Consent to Settle –the company has absolute discretion. This is out of the mainstream. Many carriers that give the Insured the right to Consent to Settlement have a “hammer” clause in their policy that automatically limits the coverage under the policy to the amount for which the matter could have been settled, had the Insured consented. This further provides that the Company’s Duty to Defend the Insured ends upon the Insured’s refusal to Consent to Settlement.
The Bar Plan’s policy gives the Insured the right to Consent to Settlement and does not automatically limit the coverage to the amount with which what the case could have been settled.
Early Resolution Benefit
The majority of Lawyer’s Malpractice Insurance Carriers do not provide a benefit to the Insured for the early resolution of a claim, or they restrict the benefit to claims resolved only in prescribed ways, i.e., through binding arbitration or mediation.
The Bar Plan offers a waiver of part of the Insured’s deductible when a Claim is voluntarily resolved within the first 24 months the Claim is reported to the company. So long as the Claim is not reached for trial, arbitration or final hearing, The Bar Plan does not prescribe the manner in which the claim is resolved.
Other Key Terms
Pay attention to particular terms when you are evaluating coverage as they can have very different meanings depending on the specific language in the policy. For example:
- Retro-Date: A date stated in the declarations to the policy that limits coverage to acts or omissions occurring after that stated date.
- Exclusions – Understand your exclusions and how they may impact your coverage. Pay particular attention to the exclusions that may impact your areas of practice or that may apply to you based upon your client base.
- Definition of Insured – Understand how your policy defines who is and is not an Insured, and any limitations that may affect your coverage.
- Definition of Legal Services – Look for a broad definition of Legal Services that encompasses your full practice and does not limit coverage to work done only on behalf of your current firm.
The cost of financial protection from a legal malpractice suit is an important factor to consider. However, it should not be the driving force in your choice of an insurance company. Understanding the policy, coverage details and process is what separates one carrier from another. 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.
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