LEGAL MALPRACTICE INSURANCE POLICY

LEGAL MALPRACTICE INSURANCE POLICY

Legal Malpractice Insurance Policy: Understanding Your Coverage is Your Best Policy

The legal malpractice insurance policy is a long, complex document. This is the first in a series of articles that will seek to demyst-ify it. Today we’ll examine the policy’s struc-ture, i.e., it’s various sections. We’ll analyze those sections in future posts.

Policy Structure

No two legal malpractice insurers organize their policy in the exact same way, but there is a high degree of similarity among them. This article will use the policy of Markel In-surance Company, one of the largest legal malpractice insurers in the US, as a proxy for all legal malpractice insurers.

Note: some attorneys may know the acronym DICE, which stands for Declarations, In-suring Agreement, Conditions, and Exclusions. Many insurance policies used to be or-ganized this way and some still are, but the legal malpractice policy isn’t.

Declarations

This is usually the first page of the insurance policy, and it’s the only part of every firm’s policy that’s unique. The information that’s ‘declared’ includes the firm’s name and ad-dress; the policy number, period, limits, and premium; the retroactive or prior acts date, which is how far back the firm’s coverage extends; and the list of endorsements that are attached to the policy.

You should always read this page to ensure that the information is correct. As legal malpractice insurance brokers, we receive our clients’ policy from the insurer, and proofread it before sending it to the client. We rarely find a mistake, but rarely isn’t “never”: we recently received a declarations page that listed the Named Insured as the first and last name of the owner, i.e., John Smith, rather than the firm, Law Office of John Smith, P.C., which is the actual Named Insured.

Note: you must notify your insurer if your firm moves. If it sends a non-renewal notice or other communication to your firm at the address on the Declarations page, and it’s re-turned as ‘undeliverable’, it’ll still be effective, even though you never received it.

Section I. Insuring Agreement – the insuring agreement tells you what the insurer will do, what will trigger its obligation to do it, and who it will do it for.

  1. The Company will pay on behalf of the Insured all sums which the Insured shall become legally obligated to pay as Damages for Claims; which are first made against the Insured during the Policy Period, and which are reported to the Company in accordance with SECTION V – When to Report a Claim, arising out of any act, error, omission or Personal Injury in the rendering of or failure to render Professional Services by an Insured or any entity or individual for whom the Named Insured is legally liable;

Clearly, you need to read this section in conjunction with the Definitions section of the policy in order to know what the words in bold type mean, and thus, who and what is covered.

In this case, Damages means “compensatory judgments, settlements or awards”, Claims means “a demand for money, the filing of Suit (a civil adjudicatory proceeding in a court) or the institution of arbitration or mediation proceedings naming the Insured…and alleging an act, error, omission… in the rendering of or failure to render Profes-sional Services”. Insured means “the Named Insured” (the party listed on the Dec-larations page) “…and any past or present partners…or employees…”, and Profes-sional Services are “services performed or advice given by the Insured in the Insured’s practice as a lawyer, arbitrator, mediator or title agent”.

It’s not until we see this definition that we know that this policy covers attorneys. Too, it’s important to know if a particular insurer’s policy will cover you for any non-attorney work that you do. Markel’s definition of covered Professional Services includes “notary pub-lic” and “”Services as a trustee, executor…”, but not as a lobbyist, so if you work in this capacity, you need coverage from a different legal malpractice insurer.

The Insuring Agreement also spells out the Insurer’s obligation to defend the Insured for a covered claim.

Section II. Insureds

This section identifies those entities and persons covered by the policy. As noted above, it includes “the Named Insured…and any past or present partners…or employees…”. The Named Insured is the entity or person identified as such on the Declarations page discussed in section I above, which proves how important it is to make sure that that party is properly identified.

Section Ill – Limits of Liability and Deductible

This section explains the different types of Policy Limits, i.e., per claim and aggregate, how Claim Expenses (legal fees, etc.) affect the limits (the various possibilities are an-alyzed here), and how the Deductible applies (the various types of deductibles are an-alyzed here.

This section should be read in conjunction with the Declarations page and any applicable endorsements.

Section IV – Territory

“This policy applies to any Claim made or Suit brought within the United States of Amer-ica, its territories, possessions, Puerto Rico or Canada.”

In other words, if your firm is sued in conjunction with a matter it handled anywhere else in the world, this policy won’t provide coverage, unless the suit is brought in the Territory as defined. The legal work doesn’t have to be done in the defined Territory, but the claim must be brought there.

Section V – When to Report a Claim

This section tells a law firm how, when, what and where to report a claim or an incident that could lead to a claim: in writing; when the Insured first becomes aware of it during the policy period; any demand letters, legal pleadings and other relevant information; to the address provided by the insurer, which is usually listed on the Declaration page.

Section VI. – Exclusions

This section explains what the policy doesn’t cover, because it’s uninsurable, i.e., illegal, dishonest, fraudulent, acts; it has nothing to do with providing legal services and is thus better handled under a different type of policy, i.e., bodily injury, employment practices; or it would be a moral hazard to insure, i.e., a demand that the firm return legal fees, etc.

Section VII – Definitions

This section defines all words that appear in bold type in the policy. They clarify and limit the scope of coverage, i.e., Professional Services are “Services performed or advice given by the Insured in the Insured’s practice as a lawyer…”, not as a doctor, architect, etc.

Words in the policy that aren’t defined mean what they’re commonly understood to mean, i.e., their dictionary definition.

Section VIll – Automatic Extended Reporting Period and Extended Reporting Period Options

This section provides the insured law firm with certain rights and options in reporting claims if either the insurer or insured non-renews or cancels the policy, or the firm stops practicing law.

Section IX – General Conditions

This section stipulates certain things the insured must do, i.e., cooperate with the insur-er’s investigation of all claims, and can’t do, i.e., assign the policy to another party with-out the insurer’s written consent, and things the insurer can and can’t do, i.e., avoid its obligations under the policy if the insured declares bankruptcy.

 

“A”-rated legal malpractice insurers may be willing to offer you a great proposal on your next policy, but to find out, you have to apply to them for coverage.

To do that, you have to engage with a broker who has access to those insurers, and will scour the market to find great proposals for you. We’re that broker.

To learn more, visit our Legal Malpractice Insurance page.

To learn more about legal malpractice insurance, visit our Legal Malpractice Insurance Center.

If you’re ready to obtain no-cost, no-obligation proposals from A-rated legal malpractice insurers, visit our applications page   

 

FURTHER READING

Here is the legal malpractice insurance policy of several leading legal malpractice insurers:

LPL Policy Aspen

LPL Policy Form Catlin

LPL Policy Form CNA

LPL Policy Form Darwin National

LPL Policy Form Hanover-Pro Direct

LPL Policy Form Hartford

LPL Policy Form Ironshore

LPL Policy Form Markel

LPL Policy Form Travelers

LPL Policy Form Wesco

LPL Policy Form Westport/Swiss Re

LPL Policy Form Zurich

 

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