Attorney Specialization- Lawyers who specialize in a particular branch of the law are held to a higher standard of conduct than a general practitioner.
California Policy Cancellation and Non-Renewal - The Cancellation and Non-Renewal Condition found in your policy form states the circumstances under which a policy may be terminated. The reasons for cancellation, the time notices required, the procedures to be followed, and the computation of return premium will all be outlined for your use. After having read the Condition you now turn to the California Amendatory Endorsement regarding policy termination. Here you may find that important parts of the Policy Condition have been deleted or expanded to be brought in line with the California Insurance Code. The point is that you must read both the policy condition and the Amendatory Endorsement to have a clear understanding of your rights and obligations.
Claim - A representative policy definition of Claim is a demand for money upon the insured, including service of suit, or institution of arbitration proceedings against any insured. However, depending on the policy the "Demand" may be defined as written or verbal or may simply be the insureds knowledge of an incident or circumstance that may lead to a claim. In the latter case insureds may be reluctant to report an incident to their carrier fearing a increase in premium or a non-renewal of their policy. However, in my opinion it is better to put your carrier on notice, than have your coverage put in question over a matter you will have to report in any case the next time you fill out an application.
Claims Made Policy - The claims made policy is the vehicle by which nearly all professional liability insurance is made available. Coverage must be in force not only when the claim is made but also when the alleged act, error or omission that results in a claim occurred, or there is no coverage.
Covered Damages - Means a monetary judgment, award or settlement for which the insured is legally liable resulting from the rendering of professional services. However, punitive or exemplary damages, multiplied portion of multiplied damage award, fines, penalties, sanctions, and return of insured’s fees. are excluded from coverage.
Covered Defense Costs - Fees charged by any lawyer designated by the insurance carrier and other authorized fees, costs and expenses to investigate, adjust, defend or appeal of the claim against the insured. Claim expenses do not include salary charges or benefits of regular employees
of the insurer or supervisory counsel designated by the insurer.
Coverage for Past Partners or Employees- If an attorney leaves an ongoing firm that maintains its professional liability insurance he or she will still have coverage for his professional services performed on behalf of his old firm. If on the other hand, the old firm dissolves or fails
to maintain a current policy or obtain tail coverage there is no longer any coverage for a subsequent claim.
Deductibles - Deductibles generally apply to both claim expenses and indemnity payments made by the insurance company on behalf of the insured. It is hoped by the insurance company that the presence of a deductible will induce a positive effect on the loss prevention activities of the firm as it would have to share in any loss with the carrier. On the other hand, the insurer would not want to impose so large a deductible that the insured would find it difficult to pay. A higher deductible also has the effect of reducing the premium to the benefit of the insured. Some carriers offer Aggregate Deductibles where there is a maximum per policy year the insured will have to pay regardless of the number of claims. A few carriers have at time offered was is known as First Dollar Defense where the deductible applies only to covered damages but not to defense costs.
Defense and Settlement Procedures - Within policy limits the insurer has a duty to defend claims even if the are "false, groundless or Fraudulent." Any settlement or compromise negotiated by the insurer and acceptable to the claimant requires the consent of the insured. However, if the insured refuses to accept the settlement recommended by the insurance carrier, he is then responsible for any additional damages and claim expenses in excess of the amount the insurer and claimant had previously agreed upon. The selection of defense counsel is made by the insurance carrier. However as a practical matter, most carriers will consider the views of the insured regarding choice of counsel.
Exclusions - Exclusions are an important part of any insurance policy and often determine the choice of one policy over another. Even when exclusions deal with the same subject matter, the treatment may differ significantly from one policy to the next. The exclusions commonly found in attorney’s professional liability insurance policies where coverage shall not apply are:
Intentional Dishonest, Fraudulent, Criminal or Malicious Acts - In connection with this exclusion it is important to find out if your policy will provide defense if such a claim is made against you, and secondly, coverage for Innocent Insureds remains in force.
A claim by any insured person or entity against any other insured person or entity - It was never the intended purpose of professional liability insurance to be involved in conflicts within a law firm. Law firms may wish to consider Employment Practices Liability Insurance if their is concern regarding issues of wrongful termination or sexual harassment.
A claim against any insured as the beneficiary or distributee of a trust or estate.
A claim for bodily injury or injury to or destruction of tangible property or resulting loss of use. - However, this exclusion does not apply to personal injury or bodily injury arising from personal injury in the rendering of professional services. Coverage for claims of bodily injury or property damage more properly fall under the Commercial General Liability policy.
Claims arising out of any insured’s services or capacity as:
an officer, director, shareholder, partner, manager, trustee, owner or employee of a business enterprise, non-profit organization, charitable organization or pension, welfare, profit-sharing, mutual or investment fund or trust. -These firms or entities should maintain there own professional liability policies or be named on the insured’s policy.
Public Officials, or an employee of a governmental body, subdivision or agency.
Continued - These organizations should obtain there own Professional liability insurance, except where a policy exclusion allows a lawyer to provide legal services to public service organization on a fee basis.
A fiduciary under ERISA of 1974 and its amendments or any regulation or order issued issued pursuant thereto, except if an insured is deemed to be a fiduciary solely by reason of legal advise rendered with respect to am employee benefit plan.- Attorneys who are involved in the investment of funds however require separate fiduciary liability coverage.
Discrimination - to any claim based on or arising out of the various forms of
discrimination as defined in the policy.- Depending on the form, this exclusion may
be broadly applied or limited to employment situations. Claims involving
discrimination in employment would properly be covered under Employment
Practices Liability Insurance. Some policies do not contain this exclusion but would
deny a discrimination claim contending that discrimination has nothing
to do with the rendering of professional legal services.
Other Exclusions - A number of other exclusions on a broad range of topics will be found in professional liability policies dealing with everything from investment advice to nuclear energy. You should contact your agent or broker for underwriter clarification should there be any question as to their application with regard to your practice or firm.
Extended Reporting Option - The extended reporting option, also known as tail coverage is available for the attorney who retires from the practice of law. This allows an attorney coverage for claims that are made after the policy has expired. However the claim resulting incident must have occurred before policy the policy expired. The policy limit available for claims is not reinstated and is limited to the available remaining limit. The premium for the ERO is based on the premium for the last policy year. It is a sliding scale based on the number of years tail coverage the attorney thinks is necessary.
Insured Individuals and Entities - The insured as defined in most policies is the Named Insured and any Predecessor Firm. It is extended to include any lawyer or professional corporation who is or was an owner, partner, officer, director, stockholder or employee, but only for professional services rendered on behalf of the Named Insured or Predecessor Firm. Any lawyer or professional corporation designated as "Of Counsel" or independent contractor while acting solely on behalf of the named insured may be covered with the permission of the insurance carrier. Lastly, coverage is provided for the estate, heirs, executors, administrators legal representatives of each Insured in the event of death, incapacity, or bankruptcy but only to the extent that the Insured would have been provided coverage by the policy.
Lapsed Coverage- Once a policy has lapsed for any reason all policy coverage ends regardless of whether or not coverage was in force at the time a claim triggering incident occurred. If at a latter date a new policy is obtained it will be difficult if not impossible to regain the lost prior acts coverage from the new carrier because of the potential moral hazard.
Lawyers Professional Liability Insurance - Insurance is provided in the form of a Claims Made Policy that covers monetary loss and expense of an insured attorney or law firm for legal liability in the rendering of professional services as defined by the policy. The policy also includes coverage for claims of unintended personal injury.
Policy Limits - It important that policy limits are adequate to cover both the cost of Defense and Damages. In choosing a limit the insured must consider any number of factors including size of firm, areas of practice, claims history, case size, and any other circumstance that will help him determine the maximum loss the firm may suffer in a worse case situation. Of course, higher limits increase the policy premium. However, since few claims rise to the level of maximum possible loss the extra charge for higher limits is on a sliding scale and therefore affordable. Policy limits are available on both a Single Limit and on a Per Claim and Aggregate basis. The latter allows for multiple claims up to a per claim limit that the insured has determined adequate for any one claim, and is less expensive than choosing a single limit to cover multiple claims, where no one claim exceeds the per claim limit. In other words, a single limit of $3,000,000 would cost more than a per claim and aggregate limit of $1,000,000/$3,000,000 and would serve no better in the described example. One final thought in choosing an adequate limit is that multiple claims that result from a single or related group of incidents will be considered as one claim under your policy.
Prior Acts Date - policies either contain a Prior Acts Date or are designated as having Full Prior Acts. The prior acts date is usually the same date from which continuous coverage was first obtained by the current or predecessor firm. Claims triggered by events occurring before this date are not insured. If a firm changes insurance carriers, it is important that the same prior acts date appears on the new policy. The Prior Acts date is also referred to as Retroactive Date.