Insurance for Law Firms - Lawyers with Claims

Firms that have found themselves the target of one or more malpractice claims or disciplinary proceedings will frequently find themselves on the receiving end of a Notice of Cancellation or Non-Renewal from their professional liability insurance carrier.
While we have seen some instances where an appeal to the underwriter results in the reinstatement of coverage, this is very much the exception to the rule, and usually the initial decision is final.
It is absolutely critical that any firm facing the loss of their insurance coverage begin working on obtaining replacement coverage just as quickly as possible. DO NOT PROCRASTINATE! Delay under these instances can have potentially disastrous consequences. Even if an appeal is being made to the current carrier, please, give us a call and let us help you evaluate the situation. If your appeal is successful, great! However, we have clients who, while successful in obtaining reinstatement from their prior carrier, received such a significant rate surcharge that it turned out to still be to their advantage to move their coverage to a new insurer.
In situations like this, the question of retroactive ("prior acts") coverage inevitably comes up. While there is no hard-and-fast answer, depending upon the circumstances of each individual application, it sometimes is best to purchase an extended reporting endorsement ("tail") from the prior carrier, and start the replacement policy on a "retro-inception" basis (no prior acts). This can effectively quarantine the past problems with the old carrier. Sometimes, however - particularly if the past problem(s) aren't terribly significant - it makes sense to obtain prior acts coverage (sometimes referred to as "nose" coverage) from the new carrier.
WHAT CAN YOU EXPECT WHEN YOU CONTACT US? Why, how nice of you to ask! The first thing that we'll need to know is exactly where things stand. Is your current coverage still in force, and if so, how long until it expires? What, if anything, have you or your current broker done about replacing the coverage? Have you received any proposals, and if so, from which carriers? Frankly, we are sometimes contacted only after a firm has plastered the marketplace with multiple applications.
The non-standard marketplace is a relatively small community, and if it turns out that all of the carriers are blocked up, there might be little else that we can do. Sometimes a carrier has received multiple - and somewhat different - submissions on a single account. This poisons the atmosphere, since the underwriter now feels that he or she is not getting a straight story. If terms are released, they are often priced higher than necessary, since the underwriter has doubts about the validity of the information, and needs to be sure that the account will be profitable. The worst case scenario in a case such as this is that an underwriter will decline an account entirely - even withdrawing terms already released.
The point here is that if we are to undertake the job of obtaining coverage for you or your firm, it is absolutely critical that we start off right - in an atmosphere a mutual professionalism and respect. If a client is not prepared to provide the information that we need, we simply decline the assignment. No one account is worth jeopardizing our firm's reputation with our underwriters.
OK, WHAT'S NEXT? If there is a mutual agreement to move forward, then we will generally ask that an application be completed, including claims information supplements on each claim, whether open or closed. Sometimes, we can utilize an application that has already been completed, at least for initial underwriting purposes. We will need a copy of the current policy declarations, as well as a claims history report (often referred to as "loss runs") from the prior carrier(s). We generally want a minimum of 5 years of loss history, but the more we have the better. Naturally, any additional documentation that can be provided that will help an underwriter evaluate the firm will be helpful.
Once we have a complete file, we can then submit things to our underwriters and begin the process of negotiating coverage terms. It is always possible that a particular carrier will request additional information, and we hope and expect that this will be provided in a timely manner.
Eventually, when we begin receiving responses from the carriers, we can then discuss the numbers, and try to refine things if necessary. We look at things like higher or lower limits, higher or lower deductibles, possible exclusions or restrictions, with or without retroactive coverage, etc.
HOW ABOUT PAYMENT? It is true that non-standard coverage can be expensive - or at least more expensive than a firm has been used to paying. We can arrange premium financing through 3rd-party, licensed premium finance companies, at pretty competitive rates. Naturally, if a firm can secure their own financing utilizing a line of credit, that's fine with us.
Once all the decisions are made and everything is in place, we can then bind coverage. Once we are confirmed bound, then we can issue a written binder pending the receipt of the actual policy. We can also issue certificates of insurance to anyone that might need evidence that coverage is in force, such a lenders, referral services, etc.
WILL I/WE EVER BE ABLE TO GET BACK INTO THE STANDARD MARKET? Understandably, this is a question that we are asked all the time. The answer is generally a "yes" but it is, of course, dependent upon the specifics of the particular situation. We try to work with a non-standard client to evaluate how things got to where they are, and what can be done to make sure things get back on track.
Sometimes, this is pretty simple, such as in the case of a client of ours; a firm that had never had a claim in its entire 15-year history. All of a sudden, someone decided that the firm had too many seriously past-due accounts receivable. What to do? Why, file lawsuits to collect the fees. Well, as the saying goes, "every action results in an equal reaction." In the professional liability business this translates into, "if you sue for fees, you will get sued for malpractice!"
Indeed, quite predictably, this is exactly what happened to this firm. Several of their suits resulted in counterclaims sounding in legal malpractice. While, not surprisingly, most of these counterclaims had little if any merit, they did require a defense. Almost all were either dismissed or settled for nominal amounts, but now this previously claims-free firm had a serious "claims frequency" problem, and when their insurance anniversary date came around, their long-time carrier declined to renew their coverage.
Unfortunately, their insurance broker at the time represented that one carrier on an exclusive basis. This meant that he had nowhere else to go. Fortunately, we have lots of places to go, and we did. We managed to convince one of our standard market carriers to write a replacement policy, though with a surcharge and an exclusion for any future claims arising as a result of a suit-for-fees situation. Trust me when I tell you that this firm has learned its lesson - albeit the hard way - there will be no more suits for fees!
We have also been successful in certain situations by utilizing outside counsel to come in and review a firms procedures. We have excellent relationships with a number of well-respected attorneys who are recognized experts in the field of legal malpractice and/or legal ethics. Make no mistake about it, this sort of thing can be expensive, depending upon the nature and depth of the review. It does, however, send a very clear signal to an underwriter that the firm not only recognizes that there has been a problem, but that they are serious about addressing the issues and putting things right.
DISCIPLINARY PROCEEDINGS, INCLUDING CRIMINAL MATTERS: Another, closely related area of non-standard underwriting involves attorneys and law firms that have been the subject of disciplinary proceedings, or even that have been convicted of crimes. Sometimes, this has also involved suspension or even disbarment. This is a specialty area in which we have enjoyed a great deal of success - often in cases where other insurance brokers have given up.
True, this coverage can be expensive, and it is often written with restrictive endorsements, but it can allow an attorney to return to the practice of law, and eventually it might be possible to remove the restrictions and maybe even to return the individual to the standard coverage market.

Firms that have found themselves the target of one or more malpractice claims or disciplinary proceedings will frequently find themselves on the receiving end of a Notice of Cancellation or Non-Renewal from their professional liability insurance carrier.

The Bottom Line?