Lawyers Professional Liability
Lawyers Professional Liability Coverage
Lawyers Professional Liability is an area of great interest for many law firms in today's litigious environment. With so many carriers emerging in the LPL market, each with their own coverage options and policy enhancements, the task of choosing the appropriate carrier and coverage can become a mind-boggling chore. To help ease the burden, here are some explanations of terms often associated with Lawyers Professional Liability policies:
Deductible Options - There are four basic types of policy deductibles.
- Loss and/or Defense Per Claim - The deductible applies for each and every claim, to loss and defense payments.
- Loss Only Per Claim - The deductible applies to each and every claim, to loss payments only.
- Loss and /or Defense Annual Aggregate - The deductible applies for each and every claim, to loss and defense payments, and is limited to the annual aggregate for the policy period.
- Loss Only Annual Aggregate - The deductible applies for each and every claim, to loss payments only, and is limited to the annual aggregate for the policy period.
Defense Costs - You will typically have the choice between defense costs inside or outside the limit of liability.
- Defense Costs Outside the Limits of Liability - Only the damages/settlement amount is deducted from the available limit of liability. Defense costs are in addition to the Limit of Liability. With some carriers, the defense costs may be capped at a specific amount.
- Defense Costs Inside the Limits of Liability - Both the loss amount and claim expenses are deducted from the available limit of liability.
ERP or "Tail" - This is an endorsement that is purchased when a claims-made policy is no longer going to be in effect. An Extended Reporting Period (ERP) or Tail extends the time frame in which a claim may be reported. Each carrier has different options for the length of Tail that may be purchased, but the most common options are 1 year, 2 year, 3 year and unlimited. Please note that a Tail is an endorsement to the policy and does not extend the actual policy period.
Lateral Hire Coverage - You will probably hear the term Lateral Hire Coverage when discussing Lawyers Professional Liability. This is a policy enhancement that some, but not all carriers offer. When you are asked if you wish to extend Lateral Hire coverage to an attorney, this simply means, do you wish to extend coverage to the attorney for legal acts that he/she performed while associated with another firm prior to joining your firm. This enhancement could be used as a "selling point" when trying to entice a new hire to join your firm.
Consent to Settle - Each carrier has explicit policy wording detailing the insured's role in the settlement of a claim. Some policy forms state that the carrier must have written consent to settle from the insured before the insurer can settle the claim. Other policy forms state that if the insured does not consent to a settlement that the carrier suggests, the insured is liable for any expenses and/or loss over and above what the insurer wanted to settle for. In addition, the insurer, in this instance has the right to remove from and tender the defense of the claim to the insured. This is sometimes called a "Hammer" and/or "Blackmail" clause.
These terms, Deductible Options, Defense Costs Options, ERP or "Tail," Lateral Hire Coverage and Consent to Settle Clause, are just 5 basic elements associated with a Lawyers Professional Liability policy. Each policy form has a unique insuring agreement and may include various endorsements and/or policy enhancements. Be sure to read your firm's policy carefully to obtain the maximum benefit from your coverage.
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