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Lawyers’ Professional Liability Insurance (LPL) – A Primer

Unlike most types of liability insurance, an LPL policy is written on a “claims-made” basis. This means that the policy in force the day the claim is made, not the date when the error/omission that led to the claim occurred, is the policy that will respond to the claim. Further, the date the error/omission occurred must be after the “prior acts date” which is the date continuous LPL coverage began.

This structure can expose an attorney to more than a few pitfalls:
  • Allowing coverage to lapse will mean that you will never be able to purchase coverage for your prior acts

  • If you move from firm to firm during your career, coverage for prior acts will be in the control of the firms you’ve left. If they no longer purchase coverage, you won’t have coverage for any claims that arise from errors/omission made while you were a member of that firm

  • At retirement, you’ll need to secure “tail” coverage, more properly titled as an Extended Reporting Period Endorsement
How much does coverage cost?

Premiums are based on the limits of liability you choose, the deductible you choose, your prior acts date, and your areas of practice:
  • The minimum limits offered are $100,000 per claim/$300,000 annual aggregate. The maximum available to a solo are $1,000,000 per claim/$1,000,000 annual aggregate. Larger firms my obtain limits up to $10,000,000 per claim/$10,000,000 annual aggregate. Please note that unless otherwise endorsed, the limits of liability include defense costs, meaning if you have a $100,000 limit, the maximum the insurance company will pay for awards/judgments and the cost to defend you will be $100,000

  • Deductibles range from $1,000 to $10,000 and can be purchased on a per claim or annual aggregate basis

  • In your first year of coverage, your prior acts date is the same as the effective date of your policy. The promise made by the insurance company is to pay for claims made that year arising from an error/omission during that year. This small window means your premium will be at the lowest level. In year two, the promise is to cover claims made arising from an error/omission from that year and the prior year, and so on. As the window widens, the premium will increase each year, stabilizing at year 7.

  • In completing an application for coverage, you will be asked to break down your areas of practice by percentages. Insurance company statistics show that some areas of practice are more hazardous that others, so complete the information carefully, remembering that this is what your premium will be primarily based upon.
Are all insurance policies the same?

No, important differences may include the following:
  • Deductibles may be either per claim or aggregate

  • Defense costs may be included in the limit of liability

  • Some policies may not provide coverage for grievance expenses

  • Exclusions or a lower limit of liability for a particular type of practice, such as securities practice, are possible

  • Some policies exclude counterclaims in suits initiated by a firm for unpaid fees
If you have any questions regarding this important and complex coverage, please contact Sue Morand at 715-3204 or via e-mail at smorand@nhbar.org.

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