Bar News - May 15, 2009
NHBA Insurance Agency - Things to Consider When Changing Your Malpractice Carrier
By: By Sue Morand
What triggers coverage of a claim
Malpractice policies (and most other professional liability policies) are written on a “claims made” basis as opposed to most other liability policies which are written on an “occurrence” basis. There is no difference in the breadth of coverage provided by either form; the difference lies in what triggers the policy to respond – the occurrence of injury or damage of a claim (as defined by the policy) arising out of the injury or damage. Three dates must be known and/or determined to trigger coverage in a “claims made” form:
- The date of the occurrence (when the error was made);
- The retroactive date (or prior and pending litigation date) on the policy;
- The date the claim is made.
When moving your coverage from insurer to insurer, the differing definitions of a claim could cause coverage problems. For example, when moving coverage from an insurer whose definition of “claim” is “a written demand received by the insured” to an insurer that applies a prior and pending litigation exclusion using the policy’s inception date, the claim will be denied by both if a suit is filed during the expiring policy term but served after the inception of the new policy. The suit does not meet the requirement as it was not “received by the insured” during the policy term and the new insurer will likely deny liability because the litigation commenced (the suit was filed) prior to inception. So when changing carriers, be sure to examine the policy language in both policies as there are at least eight different definitions of a “claim” in claims made policies.
Solo practitioners thinking of retirement
When a claims made policy is cancelled or non-renewed for any reason, coverage ceases for any unreported claims, regardless of when the error that led to the claim occurred. This fact necessitates the need for an Extended Reporting Endorsement (ERP) or tail coverage. This endorsement extends the time frame during which a claim may be reported and considered a covered claim, from one year to an unlimited amount of time. The cost of this endorsement is a one-time charge that can range from 100 percent of your expiring premium for a one-year extension to 250 percent for an unlimited extension.
However, many insurance companies offer a no-cost ERP if you retire from the practice of law and have been insured with the same carrier for a three-to-five-year period. So, if retirement is on your horizon, changing carriers could be an expensive proposition.
If you have any questions regarding your coverage, feel free to contact Sue Morand of the NHBA Insurance Agency, Inc. She can be reached at the Bar Center, (603) 715-3204 or via e-mail at email@example.com.