Bar News - October 6, 2006
What Every Lawyer Needs To Know About Professional Liability Insurance
By: Suzanne Morand Senior Account Executive NHBA Insurance Agency
The career path of an attorney may involves many changes during that attorney’s lifetime. From passing the Bar, going to work for a government entity, then to a firm, next to solo practice and back to a firm and, finally to retirement. All these changes have an effect on professional liability insurance and the ramifications of these changes must be considered.
Professional liability insurance is written on a “claims made” basis which means that the coverage in force when the claim is made will respond and not the policy that was in force when the error or omission that led to the claim occurred. This effectively means that an attorney should never just cancel professional liability insurance coverage as there would no coverage for claims that arise after cancellation for errors or omissions that occurred prior to the cancellation.
‘Heads’ and ‘Tails’
You’ve likely heard these insurance slang terms before, especially the term “tail” coverage. The official name for tail coverage is an “Extended Period Reporting Endorsement.” This endorsement, attached to a canceled or expired policy, extends the time during which a claim can be made, provided the error or omission that led to the claim, occurred during the policy period. An Extended Reporting Period Endorsement can be purchased for various lengths of time, from one year to an unlimited number of years.
“Heads” is the prior acts exclusion date. The date, included on all policies, is the date after which an error or omission may be made in order to be considered covered if a claim is made. If you have been continuously insured for professional liability insurance, this date will be the effective date of the policy when you first obtained coverage.
So, in order for a claim to be covered, the error or omission that led to the claim must have occurred after the prior acts exclusion date (heads), and the claim must be made during the policy period or during the term of the Extended Reporting Endorsement (tails).
Career changes affect coverage
When you’re making changes throughout your career, stop and think about how the change will affect your professional liability insurance. For example, when closing your solo practice and joining a firm, ask that firm if their professional liability insurance company will extend coverage for your prior acts. This will eliminate the need for you to purchase an Extended Reporting Period Endorsement on your solo practice policy. If, conversely, you’re leaving a firm to open a solo practice, obtain from the firm information about the firm’s professional liability insurance so that when purchasing your own coverage, you will have proof of continuous insurance and can purchase coverage for your prior acts.
If you have questions about your specific situation, please feel free to contact Suzanne Morand at firstname.lastname@example.org.