Each year many professionals allow their malpractice insurance policy to lapse. Many of those professionals do not fully understand the problems that could arise from doing this.
Renewing your professional liability policy is an integral part of making sure you and your firm remain protected from claims and other issues. When an attorney realizes they let their policy lapse or decide to just not continue on with coverage, they need to be aware of the problems that could arise.
If an attorney has let their professional liability policy lapse it is important to call your carrier immediately to discuss what you can do. Though most of the time it will be too late to get your policy back in place, it is important to discuss how to begin coverage again. Below are a couple of problems that can arise from not renewing your legal malpractice policy.
Keeping Your Prior Acts Date
The main problem that arises when a malpractice insurance policy is not renewed is that all prior coverage has been lost. Many professionals do not fully understand the importance of maintaining their prior acts date.
The prior acts date is the date when a malpractice insurance policy was started. The prior acts date will be the date you renew your policy year after year.
Because malpractice insurance policies are claims made policies, in order to maintain your prior acts you must not let there be a lapse in your professional liability insurance policy.
Malpractice insurance policies are claims made policies. A claims made policy means that in order to receive coverage for a claim you have to have a policy in place when the claim is reported, not necessarily when the claim occurred.
Additionally the work that caused the claim has to have happened between the prior acts date and the reported date. If the claim happened prior to having any professional liability insurance there would likely be no coverage available to cover the claim.
When professional liability policies are not renewed the insured will lose the ability to report claims for past work because their prior acts will be lost.
Requirements in Specific States
Many states have moved towards requiring an attorney to carry a specific limit of malpractice insurance. Not all states require this so it is important to check the rules within your state.
The state will ask the insured to submit either their malpractice insurance policy declarations page or a certificate of insurance. Both documents would show the start date of the policy along with the limits of liability.
If a professional lets their policy lapse or chooses not to renew coverage it could potentially put their licenses at risk or the attorney could be subject to fines by the state.
Requirements For Specific Clients or Vendors
Often times an attorney doing business with different vendors will be required to carry professional liability insurance. Typically vendors will also require a specific limit of liability be carried in order to be approved to work with them.
Often times these limits are higher than the minimum limits a professional liability company offers.
If a professional fails to renew their professional liability insurance and provide proof of coverage many vendors will no longer do business with those individuals.
An example of a vendor that would require a company to carry professional liability insurance could be the following; a bank, a state bar association, a referral service or a title company. Each vendor would be able to provide their specific requirements for the professional liability insurance limits they require in order to do business.
Overall, it is extremely important for attorneys to make sure they are renewing their malpractice insurance policy on time each year. Above are just a few of the problems that one can face when they let their coverage expire by choice, or by accident. No one wants to have to report a claim but if one does come up, you want to feel safe knowing you have a professional liability policy in place.