FAQs about Coverage

What is a claims-made and reported insurance policy?

Lawyers Mutual offers a claims-made and reported policy, which is now the most common policy form for professional liability insurance. This policy requires that a claim be first made against the insured attorney and reported to the insurance company within the policy period. With a claims-made and reported policy, two conditions must be met to trigger coverage. First, the claim must be made and reported to Lawyers Mutual during the term that the policy is in effect. Second, the act, error, or omission giving rise to the claim must have occurred on or after the policy’s retroactive date. Malpractice committed prior to the retroactive date is not covered. Lawyers Mutual often offers policies with no retroactive date, which means that we offer coverage for any prior acts, errors, or omissions that result in a claim first received and reported during a policy period.

What is the "Declarations Page?"

The Declarations Page identifies the named insured, the amount of coverage purchased by the firm, the deductible, the policy term, and any special forms, such as endorsements.

What are policy "limits?"

The amount of coverage selected by an attorney is subject to two policy limits:

1. a per claim or occurrence limit, and
2. an annual aggregate limit for all claims made during the policy period.

For example, the policy may specify the limits to be $500,000 per claim and $1,000,000 as the annual aggregate for all claims (referred to as $500,000/$1,000,000). The per claim limit, expressed as the occurrence limit, means that the company will pay no more than that sum as the total amount for all claims arising out of the same act or omission (or related acts or omissions) regardless of the number of claimants. The “aggregate” limit is defined as the total limit of a company’s liability for all claims made within the term of the policy, plus any additional time provided for in an extended reporting endorsement. The limits apply to cost of defense as well as indemnity. For example, if an insured has a $100,000 policy, a claim that results in $20,000 in defense costs above the policy deductible, and a $90,000 judgment, the insured will owe the $10,000 difference in the cost of defense and indemnity and the $100,000 policy limits.

What should I do if an attorney either leaves or joins my firm during the policy period?

If an attorney leaves your firm during the policy period, we require you to notify us in writing of the date of the attorney’s departure. Coverage under your policy will not be provided to the departed attorney for professional services rendered after the date of departure from your firm. If you add a new associate or partner during the policy period, we also require you to notify us in writing of the date on which the attorney joined your firm. This is the date coverage will begin for your new hire. New partners and associates joining your firm receive immediate coverage at no extra charge during the current policy period. However, you must decide whether your policy will cover the prior acts of your new associate or partner. If you do not wish to provide prior acts coverage, an endorsement must be added to your policy; otherwise, your deductible may be at risk for an act of your new hire that predated the date of hiring.

Is it possible to maintain insurance coverage after I cease practicing law or retire?

Attorneys choosing either to stop practicing law or to retire may continue to be insured by purchasing an Extended Claims Reporting Period Endorsement, more commonly referred to as a “tail policy.” Such an endorsement extends the period of time allowed for the reporting of claims based on incidents that occurred prior to the expiration date of your policy. Because the “tail policy” is simply an endorsement to your current policy, the policy terms, conditions and liability limits remain the same. It is important to understand that the endorsement does not provide coverage for your current acts. It only extends the time period for the reporting of claims based on your acts prior to your policy’s termination date. Lawyers Mutual offers several “tail” options.

FAQs about Limits of Liability

What are my coverage options if I insure with Lawyers Mutual?

Lawyers Mutual offers a variety of coverage options:

• $100,000/$300,000
• $250,000/$750,000
• $500,000/$1,000,000
• $1,000,000/$1,000,000
• $1,000,000/$2,000,000
• $2,000,000/$2,000,000
• $2,000,000/$4,000,000
• $3,000,000/$3,000,000
• $3,000,000/$6,000,000
• $4,000,000/$4,000,000
• $4,000,000/$8,000,000
• $5,000,000/$5,000,000
• $5,000,000/$10,000,000

Each coverage option is subject to two limits: (1) a per claim or occurrence limit, and (2) an annual aggregate limit for all claims. For example, with our lowest coverage option, $100,000/$300,000, there is a coverage limit of $100,000 for any one claim and a coverage limit of $300,000 for all claims that may occur during the policy period.

How do I decide how much coverage my firm needs to be covered adequately?

While you are the one who must determine the liability limits your firm needs to be covered adequately, we can offer several suggestions that may help in making your decision:

• Consider the monetary values of matters handled by your firm.

Average dollar value can be misleading because there is no guarantee that a loss won’t exceed the average value of your firm’s representations. Consider the potential damage to your firm if a claim arose from your firm’s biggest case. Attorneys often use this worst-case scenario when choosing limits rather than their firm’s average exposure. Risk-averse lawyers often use a multiple of two or three times the highest loss they can anticipate in selecting policy limits.

• Determine whether your practice concentrates in areas of law that have a high frequency of claims.

Loss experience studies identify plaintiff’s personal injury cases and real estate matters as the areas with the highest frequency of claims. Practice areas with high but somewhat lower claims probability include business transactions, family law, collection and bankruptcy, and estate planning. All other areas have relatively low claim probabilities. In Kentucky, we are seeing an increase in bankruptcy, workers’ compensation, family law, and estate and probate claims. Note that over-diversifying your practice in a number of relatively claims-free areas may result in a greater malpractice exposure than concentrating in areas with higher claims frequencies.

• Take into consideration the personal assets of the attorneys in your firm.

If personal assets are substantial, higher policy limits may be desirable even though the firm’s practice has low exposure to malpractice claims.

• Consider the number of attorneys to be covered under the policy.

Frequency of claims increases in direct proportion to increases in the number of attorneys in a firm.

• Evaluate the firm’s attitude toward risk.
  • Does your firm have an active risk management program?
  • Are you confident with your docket, work control, conflicts check, filing, and mail handling procedures?
  • Have you provided legal advice in a careful, responsive manner?
  • What kind of training are you providing to new attorneys in your firm?

• Consider the risk tails that may exist for your firm’s areas of practice.

The risk tail is the time between an occurrence and the claim arising from it. For example, real estate claims often have long risk tails because errors are typically not discovered until the properties are resold, which could be a number of years later. Similarly, estate and probate claims have long risk tails. A long risk tail means that claims are more costly because of inflation. In these circumstances, higher insurance limits are warranted for inflation protection.

• Keep in mind that defense and other claims costs are included in the limits of coverage in many lawyer liability policies, including ours.

Defense costs vary with each claim depending upon the complexity of the claim. These costs can erode policy limits substantially before a claim is finally paid. In choosing policy limits, consider both indemnity and defense expense.

• Understand the requirements of a claims-made and reported policy, the policy form used by virtually all providers of lawyers liability insurance and the one we use.

"Claims-made" means that the limits in effect at the time the malpractice claim is first made against the lawyer covers that claim- not the policy and limits in effect at the time of the conduct giving rise to the claim. Increasing limits as a firm’s malpractice exposure grows over the years should be considered to protect against several claims from prior years’ representations being asserted in the current policy year.

• Review your firm’s malpractice exposure annually.

You should review your exposure well in advance of your policy’s renewal date. Compare the cost of the limits option you think you should have with the next highest option, and evaluate the cost of a lower versus a higher deductible.

FAQs about Premium Rates

How is the amount of my firm’s premium determined?

Our Vice President, Underwriting, Lois Smith, analyzes and assesses the information provided in your application when calculating your firm’s premium. Although Lawyers Mutual has an established base rate for each limit of liability when combined with each deductible option, Lois may adjust your premium based on what she learns from your application. She focuses on several factors, including, but not limited to, the following:

• Size of firm
• Areas of practice
• Number of years in practice
• Full or part-time practice
• CLE credits earned
• Time/Docket control system
• Firm management
• Record control
• Claims history
• Insurance history

Is the amount of my firm’s premium affected by my areas of practice?

Yes, if your firm concentrates in certain areas of law. Loss experience studies identify plaintiff’s personal injury work, real estate, and bankruptcy as areas with a high frequency of claims. Firms concentrating extensively in any of these areas may have a higher premium.

Is the amount of my firm’s premium affected by my claims history?

Yes, but only if you have experienced two or more claims in the last three years.

Do I receive a discount on my premium if I am a new attorney?

Yes. Our New Attorney Discount Program offers reduced premium rates for attorneys in their first through fourth year after admission to the bar. Attorneys receive a 60% discount in premium in their first year of practice, a 50% discount in their second year, a 40% discount in their third year and a 20% discount in their fourth year. Beginning in the second year of practice, attorneys are eligible for additional premium credits, such as our CLE credit. This credit is applied if the attorney has earned over 20 CLE credits in the prior year.

Do I receive a discount on my premium if I practice law only part-time?

Yes. If you practice law less than 30 hours per week, you are eligible for a premium credit. In our application you have the opportunity to report your part-time practice and indicate the number of hours per week you practice law. When reviewing your application, Lois Smith, Vice President, Underwriting, calculates your premium based upon your part-time status.

FAQs about Claims Reporting

What should I do in response to a notice of a claim or incident?

You should report a claim to us as explained in the “Reporting a Claim” section of this website.

What should I tell the client if I become aware of a mistake?

If you learn that you missed a statute of limitations, other deadline, or made some other mistake in the representation of a client, you have a duty to communicate with the client about the status of the case. We recommend, however, that you contact us to get our evaluation of the matter with a view to rectifying any mistake and receiving other appropriate assistance prior to contacting your client.

What should I avoid doing when a claim has been asserted against me?

Do not respond to the claimant or the claimant’s attorney before you contact Lawyers Mutual. We will work with you on the appropriate response in preparation for the best possible resolution of the matter.

If a lawsuit is your first notice of a claim, do not file an answer on your own behalf. Immediately contact Lawyers Mutual, so defense counsel can be retained to prepare and file your answer.

Do not retain defense counsel before you notify us of the claim or suit.

Do not attempt to settle a claim on your own without first notifying Lawyers Mutual. You may jeopardize your coverage or prejudice your defense.

Do not lose, destroy, alter, or otherwise damage the claimant’s original file in any way. Make a copy of the claimant’s entire file to retain for yourself.

Is there anything else I should know?

Your policy with Lawyers Mutual is an “eroding limits” policy. Defense costs count against the limits. In addition, once any expenses or legal fees are incurred by Lawyers Mutual on your behalf, your deductible will be due. Typically, when we receive legal invoices for your claim, they are sent to you for payment until your deductible is exhausted. If your claim is resolved by us, your deductible is due at the time of settlement of the case.

We encourage you to read your professional liability insurance policy with Lawyers Mutual. If you have any questions regarding the policy and how the coverage applies, call Claims Counsel Jane Broadwater Long at (800) 800-6101 or (502) 568-6100. Please call us anytime with questions, concerns, or claims. Also, please feel free to e-mail us on our website if you have questions or suggestions on the reporting process or claims management.