Lawyers Professional Liability Insurance. Errors and Omissions Insurance. Legal Malpractice Insurance. Whatever the name, it is something every solo and small firm attorney needs to think about at some point.
Do I need to buy legal malpractice insurance? If I do, how much coverage would be right for my practice? How much will that cost? And who should I buy it from?
Even though lawyers are expected to be able to become experts in just about any topic—or at least to learn enough to question “real” experts—to serve clients as the need arises, unless you are practicing insurance law, becoming an expert in legal malpractice insurance isn’t likely to be on your agenda.
Luckily, we here at Protexure Insurance Agency are in the business of being experts in legal malpractice insurance. With over 10 years of experience and accompanying data regarding claims, coverage, and cost, we have gathered the knowledge and know-how to guide you and help you learn enough to make informed decisions to protect yourself, your clients, and your assets, and then get back to practicing law.
What You'll Learn In this Guide
Do I Need To Buy Legal Malpractice Insurance?
The first question to ask yourself is whether or not you need to or want to buy professional liability insurance. The answer to that question will be guided in part by the type of practice you have and where it is located, and then, ultimately, by your own professional principles and your appetite for economic risk.
Lawyers who do not represent private clients (like professors or licensed attorneys pursuing other professions) and in-house lawyers whose only client is the organization by which they are employed, do not generally need legal malpractice insurance, because their risk of facing a professional liability claim is nearly nonexistent. Beyond those circumstances, though, the question is not necessarily simple.
While most jurisdictions do not require solo practitioners to carry professional liability insurance, most do require practices structured as some sort of limited liability organization (like a PC, LLP, or LLC) to do so. In some jurisdictions, while you may choose not to purchase insurance, you may have to comply with mandatory training requirements or other “proof of financial responsibility” requirements instead. And a large number of states require lawyers to report their insured status every year, with some also requiring disclosure of non-insured status to all clients.
So, if insurance isn’t mandatory, why buy it? Wouldn’t “going bare” be a good choice? After all, if you don’t have the assets to cover losses arising from an error, then wouldn’t it be less likely that an aggrieved client could find another attorney willing to take on a complaint against you?
But, the protection of being ostensibly “judgment proof” is, at best, protection against only very large potential damages. If your practice generally consists of relatively small matters, going “bare” won’t really be a deterrent for potential claimants and will put your assets at risk should you make a mistake. Further, going bare could result in your losing business. Some clients may not be willing to hire an attorney who doesn’t carry insurance.
There is also a personal ethical consideration to take into account: is it right, as an attorney, to leave your clients at risk when your professional duty is to look out for their best interests? Only you can answer that question for yourself.
Once you decide to purchase coverage, you then need to decide what that coverage ought to be.
How Much Insurance Do I Need?
Legal malpractice insurance policies are not generic. While there will be many standard options and provisions offered by all carriers, there are many variants and choices you will need to make as well. The upside of this is that you can customize your policy to fit your needs. The downside of this is that it requires some time and effort on your part to build a policy that best fits you.
You want to purchase enough coverage to likely keep you economically and personally safe should you face a large or expensive claim, balanced against how much premium you can afford to pay each year.
How Risky Is Your Practice?
The first step in the process is examining the relative risk your practice presents. While the answer is influenced by a number of factors, the major determinant ultimately is your Areas of Practice. Simply put, certain practice areas present significantly more—or less—risk of claims than others.
Legal malpractice insurance carriers use years of historical claims data to determine the risks presented by various areas of practice. When considering the risk presented by any particular area of practice, carriers look at both frequency and severity: how often lawyers practicing in those areas have claims brought against them (or how often mistakes tend to occur); and how big the stakes are when a claim is made (how much money is usually at stake in the representations they undertake).
Examples of low frequency areas of practice include Alternative Dispute Resolution, Bankruptcy, Traffic/DUI work and most classes of defense work. Examples of higher frequency areas of practice include Real Estate, Employment law and Personal Injury plaintiff work.
When looking at severity there are two components that contribute to the average size of a loss: defense expenses incurred by the company in defending their insured, and actual damages ultimately paid to settle a loss. Low severity areas of practice include Family Law, Criminal Law, Bankruptcy and most classes of defense work. High severity areas of practice include personal injury plaintiff, real estate and wills, and trust and estate work. Highly complex litigation practice also presents severity risk because of the high cost to litigate the “case within the (malpractice) case” when defending a claim.
Practicing in many different or unrelated areas of practice, even if each is generally considered to be lower risk, can be more risky in the aggregate. The less-focused a firm, the more it appears that the attorney(s) may be dabbling in areas where they may have little to no experience, causing an increase in the likelihood of a claim. Sometimes, though, having a mix is helpful when it is appropriately balanced between a few high and low risk areas. For example, a solo practitioner who practices 100% real estate will be considered significantly higher risk than another solo practitioner who practices 50% real estate and 50% criminal defense.
Carriers not only analyze the risk an individual law firm presents, they also consider how much risk they are carrying in their own book of business to make decisions about who and what they are willing to cover year to year. For instance, many carriers have tight internal restrictions on work related to intellectual property, securities, and environmental law, and may decline an application for insurance based on the nature or volume of these cases the applicant firm regularly handles.
Not every attorney will be offered a full range of coverage options. A carrier will calculate the risk you present to them and then, based on that risk, will come up with a range of limits it is willing to provide to you and your practice. In some circumstances, the insurer may choose to offer terms, but restrict the amount of coverage available.
Choosing Limits and Other Policy Features
The Limits of liability in your insurance policy is the ultimate amount of money available under the policy to pay for any sort of losses you may realize because of a situation anticipated and covered by the policy. In other words, it is the amount of coverage you purchase by paying your premium.
There are a wide range of options to choose from for your policy’s limits of liability. Available limits of liability usually range from $100,000 per claim/$300,000 aggregate to $3,000,000/$5,000,000 aggregate. And higher limits may be available through a separate excess limits policy.
Limits of liability should be chosen based on your firm's level of exposure to risk and your and your colleagues’ personal financial circumstances. Your law firm’s potential exposure is a combination of the general riskiness of the areas of practice you pursue and the typical monetary value of your firm’s matters, also taking into account the potential damages if a claim arose from your biggest case. Add to that your overall attorney roster and caseload because logic and experience shows that claims increase when your volume of matters increases. Armed with this information, you will want enough coverage so that, should you have to pay to defend a claim or indemnity at the high end of your risk, you don’t put too much of your personal assets at risk.
Available Limits Structures
Limits of Liability in legal malpractice insurance policies are offered in a dual structure: there will always be specified a per claim limit and an aggregate limit. These two amounts can be the same or different depending upon your appetite. The per claim limit is the maximum amount of coverage available for any individual claim under the policy during its term. The aggregate limit is the total amount of coverage available under the policy overall, no matter how many claims arise during its term.
For example, if you purchase a policy with $1,000,000 in per claim coverage and a $2,000,000 aggregate limit (often called simply a 1 million/2 million policy), the maximum amount available for any individual claim would be $1,000,000 and the total amount available for all claims under that policy would be $2,000,000. Thus, if you face only one claim under the policy and it results in a loss of $1.5 million, the policy would cover only $1,000,000 of that amount, despite having another $1,000,000 of aggregate limit available. If you see a loss under a second claim, however, the remaining $1,000,000 could be used toward covering that.
An important factor to consider in determining what per claim and aggregate options you want or need is how the claim expenses for a claim influence your limits of liability, because the cost of responding to and defending against a claim can be significant.
There are two different ways you can structure your claim expense coverage: the amount paid by your carrier for claim expenses can reduce your per claim limit (called “claims expenses inside limits” or CEIL), or they can be paid in addition to your per claim limit (called “claims expenses outside limits” or CEOL).
Also sometimes called defense outside the limit, CEOL policies split the coverage available into two categories: the primary limit of liability, available to indemnify monetary damages; and the CEOL limit, designated for legal costs alone. This way, defense expenses ought not to exhaust available coverage for damages you may be responsible for before the claim is over.
Contrastingly, in a CEIL policy, also called an eroding limits policy, all defense expenses, including costs for court, report filing, investigation, and lawyers, come directly from your overall policy limit, eroding what may be available for coverage of ultimate damage obligations at the end of the claim.
For example, let’s say you have limits of liability of $500,000 per claim/$500,000 aggregate, and you choose to have your defense expenses reduce your limits (CEIL). If the defense costs on a claim total $50,000, that amount is paid from your available per claim limit; you then would have $450,000 remaining to cover indemnity. If, instead, your coverage is structured with claims expense outside of limits (CEOL), the $50,000 of defense expense would not be subtracted from your available $500,000 of indemnity per claim limit, essentially providing you with $50,000 for defense costs and an additional $500,000 for indemnity purposes. This is important to consider when choosing your coverage, because although it may be fairly easy to predict the extent of indemnity your firm is exposed to, it can be much harder to predict what the defense costs might add up to on a claim.
CEIL is generally 10% less expensive than CEOL. CEIL makes sense if your practice typically consists of a lot of smaller matters, where the cost of defense is more likely to be higher than the potential damages.
Almost all carriers offer a CEOL option, and although it may cost a bit more, it is an effective way to strengthen and expand your coverage. But it is also important to remember that CEOL is not a substitute for purchasing higher damages limits. Usually, there will be an upper limit cap on the amount of expense coverage available. If your expenses exceed the CEOL cap, the excess will be paid out of your “regular” limits, eroding the amount available to pay damages at the end of the claim.
How Much Will Legal Malpractice Insurance Cost Me?
So, you have a basis for understanding how much coverage you would want. The next question is: what will it cost?
Generally speaking, the greater risk you present to a carrier, the higher the premium they will charge. While this means your areas of practice are the primary elements in the premium cost equation, there are several others factors that carriers also take into account when calculating price, including:
- Size of Firm
- Annual Hours Worked
- Period of Continuous Coverage
- Step Rating
- Claims History
- Practice Management Systems and Procedures in Place
- Deductible Choices
The equation is also modified by changes in circumstances, timing of application, and carrier endorsements or other collaborations with outside entities like bar associations.
Let’s look at each factor individually:
Legal malpractice insurance rates can vary significantly state to state and reflect the insurance company’s assessment of the litigiousness and cost of handling losses in a given state. In many larger states there may also be rate differences by county, or rural vs. urban influences on the cost of claims.
Insurance carriers assign each state a minimum premium per attorney. Within each state there are also individual rates set for each area of practice. Insurance rates can change annually as more claims are filed and the insurance carrier gets a better snap shot of the risks associated with the location and area of practice. Unfortunately then, your premium might increase from one year to the next even if you have not made an error or had a claim filed against you based simply on the number of claims your carrier experienced in your state the prior year.
Number of Attorneys in the Firm
All else being equal, a solo attorney is less expensive to insure than a two-attorney firm. The principle is simple:the larger the firm size, the more work there is, the more risk there is to insure, resulting in a higher premium. But the curve does eventually flatten, with many carriers offering discounts once a firm reaches three or more attorneys. Thus, if your firm grows from a sole practitioner to two attorneys, you can anticipate your premium to double, but, if a third attorney is added to the roster, the next percentage increase may not be as large.
Annual Hours Worked
Annual hours worked or billed is considered an indicator of risk because it speaks to the volume of matters you handle and thus is a factor in the premium calculation. In most states, attorneys working under 1,000 hours are considered part time, and often will be rated at a reduced or part-time premium to reflect the reduced number of matters and clients they handle. Attorneys who work less than 500 hours a year might pay an even more reduced premium. The balance of hours worked to premium rate is complicated however, demonstrated by the fact that different carriers treat part-time attorneys differently. Indeed, some carriers are not willing to insure part-timers at all, figuring that reduction in hours or matters is potentially counterbalanced by the risk that inconsistent practicing possibly presents.
Period of Continuous Coverage
Legal malpractice insurance is always offered on a claims-made basis. This means that coverage is found in the policy that is in force at the time a claim or potential claim is brought to the insurer’s attention, which might not be the same period as when the underlying representation giving rise to the potential liability occurred. Claims made insurance coverage presents a tricky underwriting formula for actuaries who have to estimate for potential future losses based on past actions. So, the more information those actuaries have regarding those past actions, the better their estimates can be. This is particularly challenging when trying to protect lawyers, whose matters and representations of clients can span years before their outcome is fully known, and when the attorney-client relationship can continue for long after a mistake has been made.
In other words, insurers are essentially offering protection for claims arising from work that took place before any specific policy period begins. If you have carried insurance continuously and without any gap throughout your preceding years of practice, an underwriter can feel more comfortable that the risks of the work you have already performed have been assessed and accounted for. This is true even when the coverage has come from more than one carrier. This translates into better premium pricing for the purchaser.
Prior Acts or Retroactive Date
To help control for the difficulty of estimating potential risk when offering insurance to a new client who has been in practice for a while or who has had a gap in coverage (e.g. skipped purchasing malpractice insurance for a year or two), legal malpractice insurance carriers set a prior acts date on every first policy they sell to an attorney or firm. Also referred to as Retroactive Date, the prior acts date is essentially the starting line for the activities leading to claims covered by your policy. Set by agreement between the carrier and the policyholder, the carrier will cover only those claims arising from errors, omissions or other acts that occur on or after the Prior Acts Date.
Usually, the first policy you buy from a carrier will have a prior acts date that corresponds to the inception date of that policy. That means that that carrier will cover only those claims arising from representations and actions that occur on or after that prior acts date. When a lawyer maintains continuous coverage with the same carrier going forward, all subsequent policies will relate back to that first prior acts date automatically, so that over the years, any current policy would speak to claims that arise from activity that occurred even before the year in which the claim is made and reported, as long as they were delivered after the initial prior acts date.
If you switch carriers without a gap in coverage, your earlier policies will speak to work done before the new date through mechanisms like extended reporting periods and tail coverage. Or, the new carrier will agree to accept your original inception date from the prior carrier. But if you have a gap in coverage, your new carrier will essentially treat you as having started practicing on the inception date of the policy and will not cover claims arising from work performed before that retroactive date, even when the claim is made against you during the new policy’s in-force period.
One advantage of starting with a new carrier is that you will be treated as a first-year attorney for step-rating purposes, which can mean a slightly lower premium than otherwise.
Step rating is an industry-wide standard of yearly premium increases arising from the fact that professional liability insurance is offered on a claims made rather than occurrence basis. Because legal malpractice insurance policies are, at base, covering every representation you have undertaken, including even before the inception date of a given policy, the potential claims risk you present increases with every year you work.
Consequently, every year, for at least the first five years you are covered, you will have at least a minimum standardized rate increase, regardless of your claims experience or any other changes in your practice.
Claims history definitely does affect the cost of your insurance, but not necessarily in the ways you might think.
Yes, if you experience a costly claim that leads to a large payout by your carrier, it will likely lead to an increase in your premium going forward. And most carriers have some specified threshold and will not renew you or offer terms on a new application if you have a loss that crosses that line.
At the same time, legal malpractice insurance carriers recognize that all claims are not created equal. If a claim is reported but nothing is paid out, it likely will not trigger a premium increase. Indeed, most carriers appreciate when attorneys report potential claims so that there is time to intervene early and keep losses low, or avoid them all together. Moreover, when they are made aware of potential claims, it allows for more accurate underwriting, which leads to better pricing overall.
Ultimately, reporting claims and potential claims to your insurance carrier does not mean an automatic increase in your premium or a non-renewal. Conversely, failure to reveal them on your yearly application could result in a carrier withdrawing terms. Withholding claim information is a violation of your policy terms and constitutes misleading information on an application. Ultimately, reporting claims and potential claims allows you and the carrier the best opportunity to minimize your potential damages, so your insurance carrier doesn’t want to penalize you for taking advantage of the services offered to you under your policy.
Practice Management Systems and Procedures
Many lawyers don’t seem to realize how much their general practice management systems and procedures factor into their premium calculation. But a quick look at any legal malpractice insurance application will reveal the actions and systems they feel make the most difference in avoiding the most common mistakes.
For example, because missed deadlines is one of the most common errors leading to claims, every application asks about what type of calendaring system you have in place. Along these same lines, carriers want to know if you regularly use engagement and disengagement letters—which are helpful in resolving disputes before they blossom into claims—and how often you sue clients for unpaid fees, because such actions almost invariably trigger malpractice claims as defense tactics.
Carriers will also take note of the number of support staff at a firm. Many carriers have a standard ratio of lawyers to support staff that they prefer. Too much support staff may indicate that non-attorneys are performing work that the attorneys should be doing, or at a bare minimum should be reviewing. Having sufficient support staff however will allow carriers to be more understanding of a slightly higher volume of work.
Insurance carriers often reward good risk management with a reduction in premium. It is a win/win situation for you: you save some money on your premium and the likelihood of your firm facing a suit is significantly diminished.
Like with any other type of insurance, the deductible you choose will affect your premium price. And, like with limits, legal malpractice insurance policies have several deductible structures to choose from.
One option is a Per Claim Deductible, which applies to both defense expenses and indemnification for each claim made and reported during the policy period. Or you might choose an Aggregate Deductible, which is a gross deductible that caps your out of pocket expenses regardless of the number of claims you report during the policy period. This is a more expensive option, adding usually around 5% to your base premium.
Another option is the First Dollar Defense Deductible. This is a deductible that applies only to the damages—or indemnification—portion of coverage, meaning you pay out of pocket only in the event you are required to pay actual damages (in the form of judgment or settlement), while the carrier pays all other defense expenses. Such an option will generally carry an additional cost of around 10% of your base premium, but it may be worth it if your practice involves complicated representations that would be challenging and time-consuming to defend in a malpractice action.
Deductibles for legal malpractice insurance can vary from as low as $1,000 to more than $25,000. If you are in a less-risky area of practice, a higher deductible might make sense since you will pay a lower premium while facing a relatively lower risk of having to pay the deductible.
Other Pricing Considerations
Additional things that you should watch for are broker fees that will increase what you pay each year. Many insurance brokers tack on additional fees in addition to the policy premium. Such fees may be avoided by working with an on-line-only provider. Also, premium payment and financing options can increase your ultimate cost: paying in one lump sum payment avoids interest or finance charges that may be assessed on monthly or quarterly payment schedules.
Finally, it is important to distinguish between cost and affordability when making your purchase decision. Definitely factor in cash flow and the actual price of paying your yearly premium: i.e., cost. But weigh that against the overall effect an uncovered loss could have on your ability to continue in practice or meet your personal financial obligations in the future: i.e., affordability. They are not the same.
What to Consider when Choosing a Carrier
For some attorneys, choosing a legal malpractice insurance provider might just be a matter of price. They shop around and look for the lowest premium for the limits of liability and deductible they wish to purchase and leave it at that. Thinking they aren’t likely to use their coverage, or unconcerned about claims-handling service, they treat legal malpractice insurance as a necessary utility, like license fees and electricity, make their purchase each year, and think nothing more about it.
But there is more that differentiates carriers than just price, and those differences might matter to you.
First, it is important to understand the difference between an insurance carrier and an insurance agent. In the United States, most legal malpractice insurance is distributed, or offered for sale, through agency relationships. This means that the company you as a purchaser deal with is often not the actual insurer or “carrier” itself, but rather someone representing the insurer as an agent or contracted seller. For example, Protexure Insurance Agency Inc. is a Managing General Underwriter for Crum & Forster, which is the actual insurer or carrier offering coverage through the Protexure Lawyers program.
In some cases, that agent may also act as the organization that handles or conducts administration of the claims made by insureds. In other words, employees of the agency are the ones who do intake of reported claims and interface with employees of the carrier to determine coverage eligibility and how to proceed, including whether defense counsel should be hired. Each layer of the distribution chain can contribute to your ultimate out-of-pocket cost.
AM Best Rating
One good source of help in comparing carriers is the AM Best rating. AM Best is an analytics firm that provides conclusions about the financial soundness of an insurer, offering insight into the likelihood that it will have enough economic resources to pay out coverages purchased. You want to know that, should you in fact need the money you have paid for, the insurer will be able to pay it to you as promised when the time comes.
Big vs Small Carrier
One of the most effective ways for small law firms and solo attorneys to save money on legal malpractice coverage is by choosing an insurance carrier that specializes in serving the needs of smaller firms. All too often, small firms and solo practitioners are insured by large insurance companies that also insure large firms. This means the small firms are absorbing some of the large firms’ loss experience by paying premium rates based on claims that include claims by large firms.
Moreover, a smaller carrier may matter to you because of their ability to provide more focus on you. Would you rather be a small fish in a very big pond where you know the water and food is abundant but where you may have a difficult time getting attention? Or would you rather be in a slightly smaller pond where you are more easily able to get noticed when necessary?
Bar plans are endorsement arrangements: the carrier negotiates with the bar association for its endorsement. The bar agrees to market a particular carrier to bar members and the carrier agrees to certain pricing for those members. Such endorsement agreements also typically include a commitment by the carrier to accept all bar members who apply for coverage, regardless of their prior claims history. That doesn’t mean that a lawyer with a more troubled claims history or a riskier area of practice wouldn’t still have to pay a higher premium for coverage, just that they wouldn’t be rejected out of hand by the carrier.
In addition to comparing carriers, you should also compare the policies offered themselves, as not all policies are the same. Particularly important is examining the definition of “professional services” in the policy, the types of errors the policy anticipates covering, and also looking at any specific exclusions.
At a minimum, professional services should include services performed for a client as a lawyer, including acting as a mediator, arbitrator, or notary. You will want to know whether pro bono services would be covered (noting that sometimes they are excluded if offered through the auspices of a legal services organization or some other not-for-profit pipeline because the carrier expects that organization’s coverage to extend to your provision of services to their clients).
Check, too, to see whether the policies you are considering offer coverage for responding to disciplinary complaints or reimbursement for your time spent in deposition or in court when responding to a claim. Choice of defense counsel options can vary as well. And some carriers may also offer special endorsements for cyber security coverage.
Pros and Cons of Shopping Around
Shopping around for a new insurance provider every once in a while can make sense as carriers’ pricing can change as their experience in a location or a general book of business changes. Likewise, if you have significant changes in your practice, you might benefit by having a different carrier give you a new review.
However, there is one time when you absolutely shouldn’t look to change carriers: when you are leaving practice or retiring.
Because it can take years for the results of a practice mistake to come to light, lawyers leaving practice face professional liability risk for years after they turn off the lights in their office. And because legal malpractice insurance is offered on a claims-made basis, lawyers need to carry insurance over those years so that there is coverage in force at the time if a claim does eventually arise.
One way to do that is to continue to purchase a new policy every year. But the more common process is use of an Extended Reporting Period (ERP) or Tail Coverage. This is an endorsement designed to protect against potential gaps between policies or practices, by extending the time available to report a claim made after a lawyer is no longer insured under an active policy. Essentially it allows coverage to be triggered as if the claim had been made during the last policy’s in-force period.
It is common practice across the legal malpractice insurance industry to offer those they insure a free extended reporting period if the attorney has been insured with the carrier for multiple years. Protexure Insurance Agency, for example, offers a free extended reporting period endorsement to lawyers who have been insured with them for three consecutive years. While you can also pay for an ERP, many professional liability carriers require an attorney to be insured with them for a full policy term before they are eligible for an extended reporting period endorsement. So, if you are planning to leave practice or retire soon, it is best to maintain coverage with the same carrier to avoid any possible problems with covering a claim that arises after you leave practice.
Finally, make sure that the policy you have in your final year of practice has the features you’ll need to address those potential future claims, because it is that policy to which the ERP will attach. So, even if you are ramping down your practice in your latter years, you’ll still want to include coverage for activity you regularly performed in more active times. For instance, policies can have different limits on coverage for disciplinary proceedings, regulatory proceedings, subpoena assistance, defendant reimbursement, crisis event coverage and many more. Likewise, if your prior work needs special coverage or endorsements it is imperative to maintain a policy that you are familiar with and one that you already know will respond to the years of work you have already performed.
Making decisions about malpractice insurance need not be intimidating or even unpleasant. Arming yourself with some basic information will help you to undertake an appropriate analysis of your circumstances and needs each year so that you can choose a carrier and policy features that will best protect you and your colleagues at the right price.
Using the tips and information in this guide, we have created a step-by-step plan to help you to make your malpractice insurance purchase decision each year:
Determine Your Risk:
- Review your areas of practice to determine whether you are concentrating in particularly risky or safer realms. (Your malpractice insurance agent or broker can help with this.)
- Take into account any changes over the period, including:
- Whether you took on new associates or partners, or had any leave or retire;
- Whether you have taken on new matters in new areas of law or rekindled areas of practice that may have been dormant;
- Examine the prior year’s matters to determine if any activity could potentially lead to a claim in the future.
Determine what coverage and deductible choices would be best for your current circumstances.
- Include a comparison between the price of the various policy features and the amount of potential coverage and other services you will get in return;
- Consider both the potential that you will have any claims brought against you at all (frequency risk) as well as the potential losses any single claim might pose (severity risk);
- Take into account the complexity of the matters you handle as well as their size to help decide whether you want to choose coverage that includes defense costs inside or outside of your indemnity limits;
- Determine that the policies you are considering offer coverage for the kind of matters you handle and the kind of services you provide.
Compare carriers based on price, book of business, history, service, and reliability
- Ask questions of your broker or agent to determine where your size firm and your type of practice fits into the carriers’ broader book of business, specialization, and preference;
- Check the carriers’ AM Best rating to determine their economic stability and reliability;
- Don’t hesitate to ask about claims handling processes, preferred defense counsel, and other customer-service concerns
Protect against gaps in coverage
- If you decide to change carriers, work with your broker or agent to ensure that you have appropriate tail coverage or extended reporting periods to address any claims that may arise from prior work done while insured by a different carrier;
- If you decide to “go bare,” consider the consequences of losing future coverage on work done during your uninsured period;
- Compare the benefits of switching carriers to the benefits of avoiding any gaps in coverage by staying with your current malpractice insurer