LEGAL MALPRACTICE INSURANCE NON-RENEWED

Malpractice Insurance Professional Liability

Legal Malpractice Insurance Non-Renewed? This Article Has You Covered

Receiving a notice from your malpractice insurer that your firm’s coverage has been non-renewed is unwelcome news. This post will explain why that happens, and what you should do next.

I. Legal Malpractice Insurance Non-Renewed – The Main Reasons A Legal Malpractice Insurer Non-Renews Coverage


Legal Malpractice Insurance Non-RenewedA. A firm has incurred one or more malpractice claims
. If the firm’s insurer paid out more in de-fense and indemnity costs to resolve those claims than it collected in premiums, then it will likely non-renew the firm’s coverage in order to cut its losses.

Alternatively, if the insurer collected more in premium than it paid out in claims, but not enough to both pay its overhead costs and earn an adequate profit, then it will likely non-renew the firm’s coverage in order to seek more profitable accounts.

In both instances, the insurer may also non-renew the firm’s coverage because it ex-pects it to incur additional malpractice claims.

B. The insurer has paid out more than expected to resolve claims against firms in the firm’s primary practice area, i.e., personal injury law, or among firms of its size, i.e., solo practices, and so to reduce its losses, it non-renews all firms in that practice area or of that size, even those that have never incurred a malpractice claim.

C. A firm has entered a practice area that’s outside of its insurer’s target areas of practice, or its attorney roster has grown beyond the insurer’s target size.

D. The insurer is exiting the legal malpractice insurance market in your state.

Legal Malpractice Insurance Non-RenewedII. Legal Malpractice Insurance Non-Renewed – The Implications of a Non-Renewal


If your firm is insured by a Standard Market malpractice insurer, such as CNA, Hart-ford, Travelers, ALPS, Minnesota Lawyers Mutual, etc., and its coverage has been non-renewed because it has incurred malpractice claims, then the other Standard Market insurers will likely consider your firm to be a poor risk, and decline to offer it coverage.

Conversely, if a Standard Market insurer non-renewed your firm’s coverage solely be-cause it has incurred losses in your firm’s state of domicile or main practice area, or among firms of its size, then your firm should be able to obtain coverage from another Standard Market insurer, although the premium will likely be 10% – 20% higher.

If your firm can’t obtain coverage in the Standard Market, then it must shop in the Sur-plus Lines market, a/k/a/ the “hard-to-place-risks” market.

This market is less competitive than the Standard Market, and unlike Standard Market insurers, Surplus Lines insurers aren’t constrained by regulators in how much they can raise a firm’s premium. As a result, premiums typically double in this market, i.e., if your firm was paying a Standard Market insurer $10,000 for malpractice coverage, it was non-renewed, and you had to buy coverage from a Surplus Lines insurer, you’d likely pay about $20,000 for a policy with the same limits, deductible, and prior acts coverage.

Legal Malpractice Insurance Non-RenewedIII. Legal Malpractice Insurance Non-Renewed – What You Should Do Next


A. Understand why your firm’s coverage was non-renewed. Your insurer will send you a non-renewal notice; if it says something nebulous, like “the firm no longer meets our un-derwriting criteria”, then call the insurer and have them ex-plain the reason for the non-renewal.

There’s a big difference between your firm’s malpractice coverage being non-renewed because of its claims history vs. it being non-renewed because your insurer has stopped covering firms in your primary practice area or state of domicile.

B. Request a loss run from your insurer. This is a summary of your firm’s claims history, printed on your insurer’s letterhead: it lists all of the claims that your firm reported to that insurer, the total dollars the insurer has paid to resolve each closed claim, and the amounts it has both paid to date and set aside in reserve for each open claim. The loss run also lists all incidents that your firm has reported, and any reserve that the insurer has posted for them.

If you bought your policy directly from your insurer, request your firm’s loss run from its customer service department. If you bought your policy through an agent or broker, ask him or her to obtain it for you. Note: the loss run should cover your entire history with the insurer, i.e., back to your first year of continuous coverage with it.

C. If your firm’s coverage was non-renewed because it has incurred malpractice claims, then identify the cause(s) of those claims, and implement measures to prevent them from recurring.

For example, a personal injury law firm that has been sued for malpractice several times because it let the statute of limitations expire without filing suit, should improve its calendaring/docketing systems; a firm that has a history of conflict-of-interest claims should improve its conflict-checking systems and client/matter acceptance procedures; a firm that has sued clients for unpaid fees and incurred counterclaims for malpractice should improve its billing and collection practices, etc.

Prospective insurers are going to scrutinize your firm’s application and ask “what’s changed?” You need to have a good answer, or your firm won’t be able to obtain malpractice coverage at any price.

D. Work with an insurance broker who:
1. Has access to many Standard Market legal malpractice insurers, and if none of them offers your firm coverage, can navigate the Surplus Lines market on your firm’s behalf.

2. Will help your firm determine which, if any risk management measures it should im-plement to reduce its risk of incurring future malpractice claims.

3. Will help you complete the application so that you disclose all required information to the malpractice insurers, while presenting your practice in the best possible light. This includes ensuring that the form you must complete for each malpractice claim explains the corrective measures that your firm has implemented, so insurers will have enough confidence to offer it coverage.

In Don’t’ Panic if Your Legal Malpractice Insurer Doesn’t Renew, attorneys J. Randolph Evans and Shari L. Klevens state “A good broker is invaluable to a law practice or attorney — and to insurers. A good broker helps an attorney find the best program of insurance and can navigate the marketplace for the best coverages from the best insurers at the best prices.” 

If you learn why your firm’s insurance was non-renewed, obtain a loss run, implement any necessary corrective risk management measures, and work with a skilled broker, you’ll have covered all your bases, and your firm will be covered, too.

 

How We Help Non-Renewed Firms Optimize Their Legal Malpractice Insurance

A. We’re connected: we’re an independent legal malpractice insurance broker that has a strong relationship with all of the major Standard Market legal malpractice insurers, and the Surplus Lines insurers that cover law firms that can’t obtain coverage in the Standard Market. Each insurer is “A”-rated for financial strength, and offers law firms broad coverage, expert claim-handling, and risk management services.

B. We help each firm “put its best foot forward”, by reviewing its application, and suggesting any revisions or addendums that will better explain its practice and pro-cedures to insurers, including any corrective measures it has taken to prevent future malpractice claims.

C. We “shop ’til we drop”: most agents and brokers obtain quotes from three or four legal malpractice insurers. This is efficient for them, and firms usually end up with a competitive quote. As a result, it has become standard practice…but not for us.

Why? Because our mission isn’t to obtain competitive terms for a firm, but to obtain the best terms that are available in the market. To accomplish this, we identify all viable insurers for a firm, given its size, location, practice areas, etc., and submit its application to each of them, because maximizing competition is a key to getting the best terms.

That’s why most agents/brokers usually obtain quotes from 3 – 4 insurers, while we usually obtain proposals from 7 – 10 insurers.

D. We avoid quotes, which overemphasize price, and instead solicit proposals from each insurer, at various limits, deductibles, and coverage options, based on a firm’s risk profile.

After every insurer has offered its initial proposal(s), we circulate the best ones, and sol-icit another round of proposals. We repeat this process until every insurer has offered its best proposal(s).

We then present the proposals to the firm – there are usually a dozen or more – high-lighting the best ones, so it can compare them. The best proposal offers a superior combination of coverage, limits, deductible, and premium.

That’s legal malpractice insurance…optimized.

Note: If no other major insurer will offer your firm coverage, then we’ll obtain the best terms for it from among the Surplus Lines insurers that cover non-renewed firms.


What’s Next?

  • To learn more about legal malpractice insurance, visit our Legal Malpractice Insurance Center
  • If you have any questions, contact our principal broker, Curt Cooper at
    (202) 802-6415, or ccooper “at” lawyersinsurer.com
  • To obtain no-cost, no-obligation proposals, and optimize your firm’s malpractice insurance:

Download and complete the appropriate application below, and return it to us, or con-sider these alternatives:

*If the first application your firm filled out for its current malpractice insurer is stored elec-tronically, save it as “New App.”, update it, and send it to us; 

  or

*Send us a copy of either the first application or most recent renewal application your firm completed for its current malpractice insurer.

Please be sure to include any supplemental applications that you’ve completed.

We’ll copy your firm’s information onto a new application and supplemental apps., and send it to you to review, answer any questions we couldn’t, and sign.


To complete a new application, download the appropriate documents:

…………………………………
MAIN APPLICATION
Legal Malpractice Insurance Application (Solo Practitioner)

Legal Malpractice Insurance Application (2 or more attorneys; also requires the roster below)
Attorney Roster (2 or more attorneys)

PRACTICE AREA SUPPLEMENTAL APPLICATIONS bbbbbbbb
If your firm derived 1% or more of its revenue in the last fiscal year from any of the following areas, please complete the supplemental application below. Each of these ns 

Supplemental Application – Banking/Financial Institutions

Supplemental Application – Business Transactions (Word document)

Supplemental Application – Class Actions/Mass Torts/MDL
If 1% or more of your practice is in any of the following areas, please
Supplemental Application – Entertainment

Supplemental Application – Family Law  (Word document)
Allocate your Family Law billables among Divorce, Guardianship, etc. Ignore the rest of the form.
If 1% or more of your practice is in any of the following areas, please
Supplemental Application – Intellectual Property
If 1% or more of your practice is in any of the following areas, please
Supplemental Application – Plaintiffs’ Personal Injury
If 1% or more of your practice is in any of the following areas, please
Supplemental Application – Real Estate
If 1% or more of your practice is in any of the following areas, please
Supplemental Application – Securities
If 1% or more of your practice is in any of the following areas, please
Supplemental Application – Tax (scroll down to p.3)
If 1% or more of your practice is in any of the following areas, please
Supplemental Application – Title Agency
If 1% or more of your practice is in any of the following areas, please
Supplemental Application – Trusts & Estates

OTHER SUPPLEMENTAL APPLICATIONS
If you’ve been involved in any malpractice claim or suit in the last five years, or are aware of an incident which may give rise to a claim, please complete the form below for each claim or incident.

Supplemental Application – Malpractice Claim Information

If any lawyer in your firm currently serves as director, officer, trustee or partner of any entity which is a client of the firm, or has held an equity or financial interest in a client in the last five years, please complete the Outside Interests supplement below.

Supplemental Application – Outside Interests

If you have more than one office, please complete the Additional Locations supplement below.

Supplemental Application – Additional Locations

If you share office space with one or more attorneys who aren’t affiliated with your firm, please complete the Office-Sharing supplement below.

Supplemental Application – Office Sharing

OTHER REQUIRED DOCUMENTS

Please send us the following documents, as we must provide them to insurers to obtain proposals for you:

*A copy of the Declarations (first) page from your firm’s current policy.

*The Individual Prior Acts Retroactive Date Endorsement from the firm’s current policy. It lists each attorney and his/her retroactive date, which is how far back their coverage ex-tends (it’s usually the same as the attorney’s date of hire, or for the founding attorney(s), the date the firm opened). If there’s a separate Prior Acts endorsement for the firm, please provide that as well.

You separate and email these documents to us, or email us the entire policy, which will entail less effort. (After the Declarations page are the endorsements, most of which are common to every policy, and the “boilerplate” contract language that’s in all of the insurer’s legal malpractice policies).  

*A copy of the non-renewal notice that the current insurer sent to your firm.

*A loss run, which as described above, is a summary of the firm’s claims activity printed on the insurer’s letterhead. It lists all claims that the firm has reported to that insurer, the total dollars the insurer has paid to resolve each closed claim, and the amounts it has both paid to date and posted in reserve for each open claim.

Request it from either the representative of your insurer who sent you the non-renewal notice, or your agent/broker.

WHERE TO SEND COMPLETED APPLICATIONS

Email them to Curt Cooper, our principal broker: ccooper “at” lawyersinsurer.com. If you have any questions, send an email, or call him at 202-802-6415.

 

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