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How to Read Your Lawyers Professional Liability Policy (LPL)

An insurance policy is a contract, and the promise made by the insurance company in this contract is contained in the Coverage Agreement. This is the place to start when reading your policy.

The coverage agreement of you LPL policy will likely resemble the following: We will pay on behalf of an insured, subject to the limit of liability, such damages and claims expenses...for claims made during the policy period or applicable extended reporting period. The damages must arise out of a negligent act, error or omission in the rendering of or failure to render professional legal services.

The coverage agreement emphasizes certain words and that is your next step, finding the definitions of those words.

The definition of insured is normally the named insured (entity/person named on the policy), and any attorneys who were associated with the firm in the past or will be associated with the firm in the future. Be sure to check if “of counsel” or “independent contractors” are also covered.

The limit of liability is the total amount the insurance company will pay for all damages and claims expenses associated with a claim. Damages are amounts that you become obligated to pay as a result of a claim.

The definition of professional legal services varies by company to company but is often described as services performed by you for other as a lawyer, real estate title insurance agent, notary public, arbitrator or mediator. This does not include services performed as an employee, director, principal, etc. of any organization other than the named insured.

Your next step is to review the exclusions carefully. In most liability policy forms, coverage is created when not excluded. Also read the exceptions to the exclusions. Exceptions give coverage back in specific amounts. Pay attention to the conjunctions used in a list. “And” is inclusive, “Or” is exclusive.

Check to see if there’s a section titled “Additional Coverages”. Many policy forms provide coverage to reimburse you for defense costs in the event of a disciplinary proceeding.

Read the section dealing with Extended Reporting Periods (tail coverage). This section outlines the cost to purchase an Extended Reporting Periods and will provide information on when this coverage may be obtained at no cost.

Lastly, read the Conditions section regarding claims. This section, in conjunction of the definition of the word “claims” will provide guidance on what is considered a claim and when a claim, or an incident that may lead to a claim, must be reported in order to trigger coverage under the policy.

If you have any specific questions, please feel free to contact Sue Morand of NHBA Insurance Agency at 715-3204 or via e-mail at smorand@nhbar.org.

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