Over the past several weeks, we’ve had numerous attorneys reach out to discuss their professional liability insurance. While courts are shut down and many attorneys are unable to meet with their clients, they are taking this time to catch up on some of the administrative duties around the office.
Typically, we tell attorneys that the best time to review their insurance is at their policy renewal date. But, in light of the current situation our country, and the world, is in, it is well worth taking the time now to review your professional liability insurance.
Managing Your Costs
One thing we are seeing during this pandemic is the looming threat of a recession. Many of us are already feeling the effects of the economic disruption. While it is unknown how long this will last and the future effects, many are reviewing their expenses and looking for ways to cut costs.
One cost-cutting strategy you might be considering is eliminating some of your insurance.
Some believe they can drop their insurance and just pick it back up later. Unfortunately, this strategy could end up costing your firm significantly more in the long run.
With claims-made malpractice insurance, if a gap in coverage happens, you can greatly expose yourself for any past liabilities. Once a gap occurs, you are no longer insured for all the years of coverage you previously purchased.
It is best to maintain insurance during these times to properly manage the investment you have made over time and ensure future coverage.
If your law firm is struggling to afford the insurance you currently have, one option is to lower your limits or modify coverage add-ons. Reducing the “amount” of insurance you have is a great way to lower your costs without eliminating the benefit of all the previous malpractice policies you carried.
A lower amount of coverage will allow you to maintain prior acts coverage but lower your ability to pay out larger claims. If a claim comes in and pays more than your policy limits allow, you at least have some coverage for this claim instead of paying completely out of pocket.
As our economy begins to recover and you feel more secure in the financial standing of your business, you can always increase your limits again. The limit you are insured by at the claim is reported, is the limit allowable to you regardless of when the alleged error occurred.
Another option for managing your costs is to shop the market. If you have been insured by the same carrier for many years, you might want to take this opportunity to field quotes from various carriers. It is possible that other carriers in the industry could offer equal or better coverage for less.
Increase in Claim Activity
Insurance is extremely important during uncertain times. Historically, during times of economic downturn, there has been an increase in claim activity. In the 2008 recession, for example, the number of claims reported and their severity increased in the 2 years following the recession. While real estate law saw the greatest impact, every area of practice was affected.
During a crisis, whether it be recession or pandemic, people tend to be on edge. Many will look for someone to blame for their financial losses. Unfortunately for attorneys, the blame can be placed on them even when they have done nothing wrong.
With additional claims and suits comes additional costs to defend. If the suit has even the slightest chance of sticking, settlement amounts will rise to mitigate the costs to defend.
With the threat of rising claims activity, now is the most important time to review your insurance to ensure you are properly covered in the event of a claim. Take the time to ensure you have the appropriate limits and that your coverage is sound.
Increase in Individual Risk Exposure
In the COVID-19 era, attorneys are operating under different and unusual circumstances. Many have begun working remotely. While working from home reduces our exposure to the virus, it has increased our exposure to risk.
As we transition to our home offices, many of us are in a similar boat, our cyber activities within our homes are not as secure as in the office setting. To be fair, none of us expected to be working entirely out of our homes, therefore, beefing up our cyber security was not a forethought.
While there are several things you can do to improve your cyber security, investing in cyber insurance is another option to consider as cyber criminals are looking to take advantage of the current situation.
In addition to the cyber risk exposure, there are other professional liability risks that have increased due to the shift in our working life.
Working remotely has caused us to perform our duties in an alternative fashion, maybe your calendar and docket system are being updated differently, or maybe you are transitioning to a new process for vetting clients.
No matter what you have changed within your practice, changes and adjusting to those changes open us up to possible errors. It's human nature.
Due to these changes, and the inherent risk that comes with them, your professional liability coverage is more important than ever.
Recommend Steps To Take During COVID-19
Now is the best time to evaluate your professional liability insurance and make sure you are properly protected. Furthermore, if you don't currently have professional liability insurance, now is the time to start exploring your options.
First and foremost, I recommend reviewing your current coverage. This includes reading through your policy and determining if you have the appropriate limits of liability.
If you are worried about future expenses as we recover from this pandemic, first determine if reducing your limits of liability or additions is possible. Talk with your current professional liability insurance provider about ways to reduce your current insurance premium.
If reducing your limits of liability would cause your firm to be underinsured, take this time to explore other options. Law firms can save thousands of dollars by simply switching insurance carriers.
With courts being closed you may have extra time to complete a couple of applications and review alternative coverage and carriers. Make sure the quotes you are receiving are from highly rated carriers. The savings you receive from switching carriers can be easily negated by choosing a poor carrier with little to no policy benefits or enhancements nor a long history of insuring law firms.
Taking extra steps to evaluate your professional liability insurance needs can give you an added sense of security. The decisions you make today can help protect your business and your livelihood in the months ahead.
