Should You Be Shopping Your Malpractice Insurance?

If you have professional liability insurance for your legal practice, you’re off to a great start. But once it’s in place, should you “set it and forget it?” Or do you need to shop the coverage on every renewal?

“The rule of thumb I tell my clients is to get a comparative quote every three to five years,” said Joe Barnard, Director of Professional Liability Programs for ProDefender. “Things can change in the insurance market over that period of time, and you may find better pricing or a better fit for the coverage you need.”

“By comparing legal malpractice plans, you can learn which insurers offer the best rates for the coverage you need and identify areas in which your current plan may not be providing you with sufficient protection,” he said.

However, Barnard warned that lawyers who hop from carrier to carrier year after year chasing the lowest possible rate can find themselves in jeopardy if they have a claim – particularly in instances where they fail to disclose knowledge of potential claims from past work when binding coverage with a new carrier.

How should you start a professional liability plan comparison?

First, if you haven’t yet taken the time to thoroughly read your policy, do it now. Even if you read it when you signed up, go through it and make notes of key coverage terms and amounts so you can make the most direct comparisons possible. Then, you’ll be able to determine within minutes whether another plan provides better value.

What should you be looking for in the policy terms?

There can be significant differences in policy terms, which should be reflected in each policy’s premium rates. Typically, you get what you pay for in an insurance policy, so while you’re looking for ways to cut costs, be careful not to leave yourself exposed to more risk than you can handle. Below are some of the key terms to keep an eye on while making your comparisons.

Who is covered, and for what activities?

Be sure to understand which individuals who do work for your firm will be covered by the policy. For example, will it cover

• Both full-time and part-time employees?

• Former or retiring employees?

• Contract attorneys?

• Firm attorneys while doing work outside the firm?

What are the coverage limits?

Make sure your coverage limits are appropriate for they types of cases your firm handles or is likely to handle in the coming year. If you deal in a high-stakes area of practice like commercial real estate, securities, commercial business transactions, or business tax, it’s critical that you have coverage limits that are sufficient to protect you and your business in the event a large claim arises. On the other hand, if your areas of practice expose you to a relatively low level of liability, then lower limits can help you save on your monthly premium.

Are defense costs inside or outside the coverage limit?

This is a critical difference among policies. When defense costs are inside the limit, the coverage limit begins to erode as soon as defense against a claim begins—even if it ends in a settlement or judgment in your favor or if the claim is ultimately abandoned. Defense costs that are outside the limit are subject to separate limits, and the limit available to pay a plaintiff’s award remains intact until it’s used to pay a settlement or judgment.

Are bar complaints and disciplinary proceedings covered?

Even if a claim doesn’t lead to a lawsuit, defending against it can be expensive and time consuming. Because it’s much easier for a client to file a complaint against you with your state bar than to undertake a lawsuit, providing defense for other kinds of claims adds substantial value to a policy.

What are the deductible terms?

In addition to knowing the deductible amount, it’s important to understand how and when it will be applied. For example, will it apply more than once in a year if multiple claims are filed? If so, is there an annual limit to the total amount you will have to pay in toward deductibles? Remember that higher deductible amounts generally correspond to lower premiums and vice versa.

Do you have the right to reject settlement agreements?

To maintain control of your professional reputation, make sure the policy does not give the insurer the right to settle claims without your consent. Understand, however, that it’s common for policies that allow you to reject claims to also limit coverage to what the insurer would have had to pay if the settlement had been accepted.

Do you need tail coverage?

If you retire or change positions, you will still want to be covered for work that you did before that time. Look into your policy’s provisions for an extended reporting period so you can remain protected in case claims are made after a career change.

Are prior acts covered?

If a claim is made during your coverage period based on work that you performed before your policy began, will you be covered? If you change policies, make sure that you have an adequate combination of tail and retroactive coverage so there is no gap in your protection.

Comparing professional liability plans doesn’t have to take a lot of your time, and it could result in savings and better coverage.

ProDefender will quote on another company’s completed application, which means you don’t have to fill out multiple forms to get a competing quote. You can upload a file of your most recent completed application on the ProDefender website to start the quote process. Click the image below to contact us for a quote. We’re also available by phone at (866) 434-8557 or email at info@prodefender.com.