Do you ever find yourself looking at legal malpractice insurance applications scratching your head wondering what language is in front of you?
The world of insurance is so big, it really does have its own language.
I can remember when I first started working in the insurance industry, I had no idea what I was reading. (Yes, you read that right. This coming from the author of many malpractice insurance articles.)
Now, 3 years later, the insurance “language” feels like second nature.
As a lawyer, you may feel the same way about insurance terms. You spent years studying and practicing law, not insurance.
While some of these terms might be familiar, others you may be encountering for the first time. In order to obtain the legal malpractice insurance policy right for you and your firm, it’s important to understand these 16 insurance terms.
1. Limits of Liability: 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; the amount of coverage you purchase by paying your premium.
Lawyers Professional Liability insurers offer a variety of types and sizes of limits, including:
2. Split Limits: The maximum dollar amounts the insurer will pay for different components of each claim and/or for different claims overall. Generally divided into two types: per claim limits and aggregate limits.
3. Per Claim Limits: The maximum amount of coverage available for each individual claim under the policy during its term.
4. Aggregate Limits: The maximum amount of coverage available under the policy overall, no matter how many claims arise during its term.
5. Claims Expense Outside Limits (CEOL): Also sometimes called defense outside the limit, CEOL policies split the coverage available into two categories: the primary limit of liability, available to settle monetary obligations or damages; and the CEOL limit, designated for legal costs alone. This way, defense expenses will not exhaust available coverage for damages you may be responsible for before the claim is over.
6. Claims Expense Inside Limits (CEIL): Also called an eroding limits policy, it is the opposite of CEOL. 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.
7. Deductible: The amount of money an insured must pay out of pocket before funds become available under the policy’s coverage provisions. These are offered in a variety of forms.
8. Per Claim Deductible: A deductible that applies to both defense expenses and indemnification for each claim made and reported during the policy period.
9. Aggregate Deductible: A gross deductible that caps your out-of-pocket expenses regardless of the number of claims you report during the policy period.
10. First Dollar Defense Deductible: 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.
11, 12. Claims Made/Claims Made and Reported Policy: An insurance policy that covers claims brought to the insurer’s attention during that policy’s in force period, which might not be the same period as when the underlying representation giving rise to the potential liability occurred.
13, 14. Prior Acts Date/Retroactive Date: Essentially, the starting line for the activities leading to claims covered by your LPL 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.
15, 16. Extended Reporting Period/Tail Coverage: Insurance 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 by a prior carrier; essentially allows coverage to be triggered as if the claim had been made during the policy’s in force period.
We understand that being unfamiliar with malpractice insurance jargon can make it difficult when purchasing an insurance policy. But, with a better understanding of these insurance terms, we hope the process will be a breeze.
When filling out an insurance application or renewing your policy, Protexure’s insurance specialists are always available to answer any questions you may have including defining and explain insurance terminology you come across in the process.