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Policy Terminology Questions
What is Claims-made and Report Coverage?
“Claims-made-and-reported” coverage is the most common type of coverage provided in professional liability insurance policies. It is distinguishable from “Occurrence” coverage in that the relevant date to determine coverage is when the claim is made and reported, not when the act or omission giving rise to the claim occurred.
Most people are familiar with occurrence coverage from their auto or homeowners policy. With these types of insurance, the policy that covers a claim is the policy that was in effect on the date the event giving rise to the claim occurred (e.g. the auto accident or the hail storm).
However, with claims-made-and-reported coverage, the key date is the date the claim is first made against the insured or the date the insured first becomes aware of facts or circumstances that might reasonably be expected to be the basis of a claim, NOT the date of the alleged error or omission by the insured. The claim generally must be reported to the insurer during the same policy period as the insured’s first knowledge.
Insureds should also be aware of the term retrospective (“retro”) date. If a retro-date exclusion applies, the policy will not cover any claim arising from an act or omission that occurred prior to the retro date, regardless of when the claim is first made or when the insured first became aware of facts or circumstances that might reasonably be expected to be the basis of the claim.
What is the difference between first dollar defense and waiving 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.
What is “career coverage”?
Career coverage provides protection for legal services for your entire past career as a practicing attorney. The Bar Plan does provide career coverage if you have had continuous coverage.*
Are prior acts coverage and career coverage the same?
No. Prior acts coverage can be limited by endorsement or by the policy language. Career coverage covers your entire past career as a practicing attorney.
Policy Coverage Questions
What limits should I carry for my practice?
Recommended limits vary. In considering limits, ask yourself: “If I make a mistake, how much will the client be damaged?” How much you pay for your premium depends on many different things including your areas of practice and the limits of liability you choose.
The Bar Plan has limits available from $100,000 to $5,000,000, with excess limits available up to $10,000,000. In New Mexico, limits start at $500,000.
Do most policies offer first dollar defense?
Yes, but in many policies you must request this coverage. It is not automatic. The coverage must be endorsed on the policy for an additional premium. The Bar Plan provides first dollar defense.*
Statistics at The Bar Plan show that 40% of all paid claims in 2004 were closed with an expense payment but without an
Does my previous employer have coverage for the legal services I provided during my employment?
Normally yes, under the “former partner/associate” coverage of the policy. However, your prior acts coverage is solely dependent on your former employer.
You could be exposed to risk if they:
1. Did not continue to carry insurance.
2. Do not carry a policy that provides former partner/associate coverage.
3. Did not continue to stay in business.
4. Merged with a firm that did not pick up the firm’s former partners/associate coverage.
5. Did not split in such a manner that there is a successor firm that will be able to pick up the coverage.
What is a “Voluntary Resolution Refund”?
With this coverage if you report a claim and it is resolved within 12 months of the report, The Bar Plan will waive 50% of your deductible to a maximum of $12,500. If the claim is resolved between 12 months and 24 months, 25% of your deductible to a maximum of $6,250 will be waived.
Do all policies provide coverage as an arbitrator or mediator?
Not necessarily. You should review your policy. The Bar Plan does provide this coverage.
Does the policy include: Prior acts of attorneys for professional services before joining the firm?
The Bar Plan provides true “career” coverage to the attorney.* The Bar Plan does not limit coverage to services provided solely on behalf of your present employer as some policies do. Why risk a gap in coverage just because you change firms. Career coverage as offered by The Bar Plan is too important to take for granted when considering other companies’ policies.
Does the Policy cover professional services performed solely on behalf of the firm for a client of the firm?
The Bar Plan provides coverage for legal services performed by the insured. The Bar Plan does not limit the services to clients of the firm. Under some policies, you may not be protected if you represent others as an accommodation or on a pro bono basis.
Does the policy cover an attorney acting as a trustee?
Since you do not have to be an attorney to be a trustee, some policies do not provide “trustee” coverage; The Bar Plan does.
Does the policy cover an attorney acting as a title agent?
Some policies exclude this coverage; The Bar Plan provides title agent coverage when the title work is performed out of the insureds law firm for clients of the firm. Prior to 2006, title agent coverage was provided only by endorsement to the policy at no additional premium.
Does the deductible apply to indemnity and defense?
The Bar Plan provides first dollar defense, which means your deductible, applies only if there is an indemnity payment. This is important because most reported claims are paid without an indemnity payment. Other insurance companies may provide this layer of protection but at additional costs to you.
Does the policy exclude coverage if I represent one of my partners in a legal matter?
The Bar Plan provides coverage for a claim presented by an insured against another insured as long as the claim arises out of an attorney/client relationship. Some policies exclude such representation.
Does the policy exclude a defense under the “Intentional Acts” provision for a person accused of a wrongdoing?
The Bar Plan will generally provide a defense to all members of the firm under the “intentional acts” exclusion when the act, error or omission occurs while the wrongdoer is acting in a professional capacity providing legal services unless the claim arises out of a defalcation of money or property. Most policies do not provide a defense to the attorney accused of a wrong doing.
Does the policy limit coverage under the “Innocent Partner” provision?
The Bar Plan does not limit the coverage under the “Innocent Partner” provision of the policy. Some policies state their indemnification provision for the “Innocent Partner(s)” is in excess of the wrongdoer’s assets in the firm.
*Subject to Underwriting Guidelines
Current Insured Procedural Questions
Do I need to report an incident that may give rise to a claim?
Yes. Protect yourself and report incidents and claims as soon as you become aware of them.
I reported an incident three years ago when I carried lower limits. The claim is now being pursued. Which limits will apply?
You should review your policy. Most policies state the limits of liability carried at the time the incident was reported apply to this claim.
Part-time and Non-practicing Attorney Questions
What if I plan to retire?
You should review your policy. The time frame allowed to request this coverage as well as whether or not there is a premium charge, varies from policy to policy.
For those who retire early, coverage is free if you are 55 years of age, insured with The Bar Plan for three consecutive years and request the coverage within 30 days of the termination of your coverage.
Do all policies provide free Non-Practicing Extended Reporting Coverage in the event of death or disability?
No. You should review your policy. The time frame allowed to request this coverage as well as whether or not there is a premium charge, varies from policy to policy.
In the event of death or disability The Bar Plan policy provides free unlimited non-practicing coverage for individuals who have been insured with them for three consecutive years. Notice must be given to The Bar Plan within one year from the date of death or disability.
Is coverage available for someone that is working as an attorney on a part-time basis?
Some carriers may offer a part-time policy. The Bar Plan does offer a part-time policy.