NHBA Insurance Agency, Inc. is the provider of the majority of Lawyers’ Professional Liability policies in the State of New Hampshire. Acting as a broker on behalf of NH Bar members, NHBA Insurance Agency has relationships with multiple insurance companies and can match members with the insurance program that will provide the best price and coverage on a firm-by-firm basis.
Lawyers’ Professional Liability Insurance – 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, 715-3204.
How to Read Your Lawyers Professional Liability Policy
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, 715-3204.
Does Your Firm Have the Correct Professional Liability Coverage?
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