Insurance policy

What Factors Make Your Legal Malpractice Premium Go Up?

You purchase a legal malpractice insurance policy to protect your law practice. You pay your initial yearly insurance premium, which is based on a variety of answers you provided in the malpractice application. The underwriter reviews the application, enters the information into a rating system and comes up with the premium. Factors which determine the premium include:

  • Limits
  • Deductible
  • Areas of practice
  • Number of attorneys
  • Experience
  • Territory (county)

Another factor involves how many years you’ve had the insurance consecutively (a ‘step rating factor,’ as the underwriters call it). Every carrier has its own list of factors and rating system. You can often find these rates filed with the Department of Insurance in your state, which is available as public information.

Lawyers’ Professional Liability (LPL) policies are written on a claims-made basis. As you go through the renewal process in the second year, you’ve added your first year of retroactive coverage. For example, let’s say you bought your initial LPL policy on July 1, 2000. That date was the start of your retroactive coverage. When you go to renew that policy for July 1st, 2001, you now have one year of retroactive coverage dating back to that July 1, 2000 date. Thus, between years one and two, you have taken the first step and the carrier is now covering your practice for one year of retroactive or prior acts coverage.

Most, if not all, LPL policies mature after five to seven years. That means you will see increases every year for at least the first five years of renewals as the step rating process goes forward and the carrier is covering you for a longer period. Once the policy is fully rated, somewhere between five to seven years, you then see a leveling off of the premium. However, factors such as claims, significant changes in areas of practice and even the carrier taking rate (raising base rates) can also factor into an increase in premium down the road or after those five to seven years.

Every carrier has a step rating process in determining their rates or premium. So, even if you decide to move to a different carrier within those first five years, the new carrier is going to apply their own step rating depending on where you are in the process. You can usually expect to see sometimes as much as a 40 percent increase in premium from year one to two, and by the time year five comes around you could see your premium double. You should consult with your LPL broker about this process so you have this knowledge from the beginning.

Hirsch Insurance Brokerage is an independent insurance brokerage dedicated to the professional liability and commercial insurance needs of lawyers. We’d love to hear your feedback. You can contact us with any questions or comments and we’re always happy to provide guidance where possible.

Please take a moment and visit us here: https://hirschinsuranceagency.com/

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Top 5 Ways to Avoid Legal Malpractice

It is an unfortunate reality for a great deal of lawyers that malpractice claims have simply become part of the “cost of doing business,” and regardless of the steps that some lawyers take, they may still end up as a defendant in a legal malpractice claim. But following the guidance below should reduce — and hopefully eliminate — the threat of malpractice claims for many lawyers.

1. Don’t “Dabble”
Many lawyers have gotten themselves into situations where they have stepped far outside their normal practice areas in order to accept a new matter or accommodate a client, and that can easily lead to malpractice claims. Don’t be afraid to specialize, and don’t be afraid to refer clients to other lawyers.

2. Avoid the Problem Client
“Problem clients” (i.e., clients who expect favors, complain excessively or unreasonably, have unreasonable expectations, or don’t pay) increase your risk of malpractice claims in two ways: 1) they frequently get themselves involved in difficult situations more likely to result in adverse consequences; and 2) they are more willing to blame you when something goes wrong. If you can avoid them at the outset or part ways with them once they become difficult, you will certainly reduce your exposure to malpractice claims.

3. Define the Scope of the Relationship
Perhaps the easiest way to establish certainty in the attorney-client relationship is to use an engagement letter. It should define who the attorney represents and the scope of the engagement. When appropriate, it is also a good idea to specify who the attorney does not represent, and what she will not be handling. Doing this will set client
expectations and protect the attorney.

4. Comply With Deadlines
Calendaring errors remain a leading cause of malpractice claims. Common mistakes include data entry errors, failing to use file review dates, absence of a back-up calendar, and procrastinating until the last minute to file documents. To avoid this trap, an office should have at its organizational core an office-wide calendar and practices in place regarding its use.

5. Avoid Conflicts of Interest
It is crucial that each firm establish stringent procedures for early identification and resolution of the broad variety of situations in which unexpected conflicts may arise. Lawyers should be particularly cautious when asked to represent two parties, become personally involved in a client’s business interests, serve as an officer of a client’s company, or deal with unrepresented parties.

Written by and republished with permission from Matthew S. Marrone.

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Understanding Your Policy: Claims-Made Reporting Procedures

Attorneys often ask us, “Now what?” after applying for malpractice insurance. We’re uncovering the mystery; here’s what you need to know about what happens after you apply and in the event you need to utilize your coverage.

Once you’ve completed the malpractice application process and bound coverage, you will receive a copy of your professional liability insurance policy. While it’s important to keep a copy of your policy filed away in a safe place, before you do so you should immediately begin to familiarize yourself with the claims-made reporting procedures within your policy.

Virtually every lawyers’ professional liability policy being sold today is written on a claims-made-and-reported basis. A claims-made-and-reported policy has a two-part trigger for coverage: first, that a claim is made against the insured during the policy period, and second, that the insured reports the claim to the insurer within the policy period. These policies have a set of distinct procedures the insured must follow in order to report an incident, circumstance or claim. It can be titled differently in every policy, but here are some suggestions to look out for:

  • “Notice of Claims”
  • “Notice of Claims and Potential Claims,”
  • or, “Insured’s Duties in the Event of a Claim.”

Reporting a claim or potential claim is one of the most important obligations, if not the most important obligation in a claims-made policy.   These policy reporting procedures must be strictly adhered to; otherwise, the insured risks the possibility of a denial of coverage or rescission of the policy altogether based on non-compliance. Familiarizing yourself with these procedures at the very start will give you the basic knowledge to take a proactive approach and avoid the pitfalls that can arise should you receive a potential incident or claim from a former client.

Today, most lawyers’ professional liability policies have a twenty-four-hour-a-day pre-claims assistance hotline to call if you are debating or have doubt about whether you should be reporting a set of facts or circumstances.

The best way to protect yourself is to plan ahead. By taking the time to familiarize yourself with these claims-made-and-reported provisions within your policy, many attorneys can strategically avoid the most common coverage issues that arrive with the filing of a legal malpractice action.  Report a claim to your insurer as soon as you are aware of it. Submitting notice to your insurer in writing is advisable whether or not your policy requires written notice.

We’re here to assist you with any questions you have regarding your policy. Give us a ring if you ever have a question or doubt about your coverage!

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How the Attorney Benefits from Using a Specialized Professional Liability Insurance Broker

When a prospective client has a divorce or custody issue they turn to a family law attorney for guidance. The family law attorney has expertise in the field and knows the law in this area. The same principal should apply when purchasing professional liability insurance. You should seek out a professional that understands the intricacies of a claims-made insurance policy.
No two professional liability polices are created equal. They have subtle nuances and fine print that can make the difference if you ever have an incident or claim. Endorsements and exclusions can apply differently to every policy. You want a broker who studies these polices, sells them on a regular basis and has a familiarity with their distinctions. Their value should extend well beyond the sale of the policy. They should help educate you and your staff and provide the very best skilled service possible.

Think beyond just purchasing the policy:

  • What happens if there is an actual claim?
  • Who will you turn to?
  • What will they know about the policies reporting procedures?
  • What about raising the policy limits or adding an attorney to the policy?
  • How about complex issues, such as, purchasing an extended reporting period (tail) policy in case the firm dissolves or splits?

Professional liability brokers can help answer these questions and many more. They can help answer and assist in filling out complex applications that can make the difference in the underwriter’s evaluation of the risk and the eventual determination of the premium.

The specialized broker has relationships with specialty insurance carriers who only underwrite lawyers’ professional liability policies and the broker can in-turn advocate on the firm’s behalf. Over time, they develop these relationships with specific underwriters and they can discuss your application and submission on a one-on-one basis. If your firm has a complex claims history, this advocacy can be a determining factor in whether an admitted or non-admitted carrier will accept your application. This ultimately can be the difference in thousands of dollars and what is actually covered in your firm’s policy.

Hirsch Insurance Brokerage has dedicated itself to professional liability insurance for lawyers. We’ve spent the last decade listening and getting to know our lawyers and law firms, while continuing to educate ourselves. We have built strong underwriting relationships and pride ourselves in providing a hands-on approach. We understand what’s at stake. Your professional reputation and business needs protection. Why not treat your firm to the guidance and counseling it needs when purchasing professional liability insurance? We believe in relationships, reliability and results.

Seven states now require lawyers to disclose directly to clients that they do not carry professional liability coverage.

In February 2014, the Supreme Court appointed an ad hoc committee to address the questions of whether attorneys should disclose to clients and report on the annual registration statement whether they carry professional liability insurance; whether such a client disclosure requirement would unfairly burden small firms and solo practitioners; whether such a disclosure requirement is even necessary if there is no mandate to maintain professional liability insurance; and whether mandatory insurance itself would unfairly burden small firms and solo practitioners.

After extensive review and discussions of material contained in its 170-page report, the committee concluded that professional liability insurance should not be mandatory for New Jersey attorneys because it would be unworkable in the marketplace and unfairly punitive to small firms, solo practitioners and attorneys engaged in the part-time practice of law. Except for Oregon, other jurisdictions studying the question have determined mandatory malpractice coverage is neither practical nor necessary for attorneys to serve their clients competently. This conclusion has been echoed by the American Bar Association after study of the subject.

The ad hoc committee also concluded that a mandatory insurance requirement might well place the decision as to who is able to practice law in the hands of private insurance carriers, few of which write policies in this state, and those who do have strict underwriting criteria and detailed application processes. Unlike Oregon, which has guaranteed coverage, New Jersey attorneys might be unable to obtain liability coverage for any number of reasons, many of which are unrelated to attorney claims history, competence and integrity, or practice in what are believed to be high-risk areas of the law.

In 2003 the ABA charged one of its standing committees to consider if attorneys should be required to disclose whether they carry professional liability insurance coverage and, if so, the form of that disclosure. The ABA committee recommended a model court rule requiring lawyers to inform the highest court in their jurisdiction, or a designated entity, whether they have coverage. The thought was that consumers of legal services would then have access to this information and decide whether to hire a lawyer who does not maintain coverage. The ABA, however, rejected the recommendation that lawyers be required to disclose directly to clients whether they are covered by liability insurance. A minority of the committee contended that such a proposed registration rule does not truly help the public make fully informed decisions because it depends on prospective clients seeking out the information.

The New Jersey State Bar Association has filed comments to the ad hoc committee report opposing both mandatory coverage and disclosure.

Seven states now require lawyers to disclose directly to clients that they do not carry professional liability coverage, although 17 states require that lawyers make known to authorities the existence of liability insurance on some form of an annual registration statement.

On the premise that liability insurance coverage is a material fact that a prospective client has the right to know at the time of representation, without searching registration filings, the ad hoc committee recommended that the court require attorneys to provide liability insurance information, including the limits of coverage, on annual registration forms and that the disclosure be communicated to clients because of the need for transparency in attorney-client dealings, even though a professional liability policy does not, of itself, speak to an attorney’s ability, experience or competence.

In reviewing the comprehensive, well-documented and fully developed arguments for and against a mandatory disclosure system set forth in the report, we believe that the committee in its client disclosure recommendation has reached the right result in solving this difficult problem of weighing client interest with the interest of attorneys in terms of fairness and practicality.

We would, however, offer one caveat to the committee’s recommendation. The issue of whether failure to abide by a registration or disclosure rule should create a standard for civil liability or the basis for a malpractice claim has been left by the committee for development “through common law in the ordinary course.” Because there is an absence of evidence linking competence and integrity of attorneys to professional liability insurance, the failure to appropriately make disclosure by registration or to directly advise the client might have a disproportionate adverse impact on jury decisions, rather than the jury concentrating on the only salient liability determinant: deviation from an accepted standard of legal practice. Therefore, we would recommend that a violation of the disclosure requirements be barred from use in civil trials where deviation from accepted legal standard is the key to the verdict.

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What is Covered in a Lawyers’ Professional Liability Policy (LPL)?

Most lawyers’ professional liability policies cover the attorney for financial loss suffered by third parties arising from wrongful acts, errors and omissions in providing legal services. Claims such as negligence, misrepresentation, violation of good faith and fair dealing, as well as inaccurate advice are typically covered in LPL policies. Remember to visit the legal services definition in your policy, as every policy has a different definition of what’s covered. This insurance also usually provides coverage for ancillary services regularly provided attorneys as a natural offshoot of their regular practice, such as:

  • Services as a notary public
  • Services as a title agent and or title agency
  • Acting as a trustee or executor of an estate in connection with representation of a client
  • Acting as an officer, director, or member of a legal professional association
  • Mediating legal disputes

Pay particularly close attention to what is NOT covered or excluded in a lawyers’ professional liability policy. Fraudulent, criminal, malicious and dishonest acts are excluded from the policy. In addition, bodily injury and property damage are not covered. Make sure you pay close attention to those exclusions in the policy.

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Lawyers: Why Purchase Professional Liability Insurance?

The answer might seem obvious, but there are many reasons why a lawyer should purchase professional liability insurance. You spent so much time and money investing in the opportunity to become an attorney. You went to law school and then all the time you spent prepping for the Bar. You passed and became a practicing attorney. Why not protect that professional investment with peace of mind?  After all, that’s what professional liability insurance is: security and protection of your assets from the financial devastation of a claim, grievance or inquiry.

Malpractice insurance serves many purposes. Typically, malpractice policies are designed to provide coverage for claims that arise from “wrongful acts” committed in the rendering of legal services (sometimes called professional services) in your capacity as a lawyer. Generally, they provide both indemnification coverage and claims expense coverage, subject to specified deductibles and endorsements.

Let’s explore some of those reasons for coverage:

  • While you always do your best, maintain professionalism and do everything in your power to get the very best outcome for your client, you can never be certain of your client’s expectations or satisfaction level.  After all, human beings can be very difficult to please!
  • The reality is that NO attorney is perfect. Even if you practice excellent risk management techniques, you may make a minor mistake that results in a claim.
  • Receive objective advice should a malpractice claim arise;
  • Minimize the time and money you spend to defend yourself;
  • Have the satisfaction of knowing an expert attorney in handling professional liability claims is defending your claim;
  • Reduce the chance that a claim will result in a severe financial hardship;
  • Ensure a prompt and reasonable settlement or dismissal of a claim;
  • Save time and reduce the frustration of dealing with frivolous claims;
  • Provide protection for your professional reputation;
  • Ease the financial burden of possible settlements and judgments against you;
  • Protect your clients from significant financial losses;
  • Allow you to protect the interests of your clients as you deal with claims.

These are just some of the many reasons to purchase malpractice insurance. As you consider different providers and policies, make sure you understand the all the possible benefits of professional liability insurance, the various acts that lead clients to make claims and the restrictions and requirements that apply to your policy. Your professional reputation and financial security may depend on the legal protection of professional liability insurance.

At Hirsch Insurance, we are here to steer your through those troubled waters. Our expertise and dedication to lawyers’ professional liability insurance can help you find the coverage your firm needs to protect those assets.

Post- Hurricane Harvey: Helpful Tips to File a Property Insurance Claim

If your personal or professional assets were damaged during Hurricane Harvey, it’s likely that you have started the process of filing an insurance claim to cover the replacement of those items. Beyond calling the insurance company to get started, there are many things you need to know and strategies you can put in place to make sure your claim is processed in a timely manner.

1. Understand Your Policies and Coverage

The starting point should be learning what policies you have that may “cover” any damages to your property. Do you only have a dwelling-based policy? Do you have a separate policy for wind-damage, perhaps through the Texas Windstorm Insurance Program? Do you also have a National Flood Insurance Program (NFIP) backed policy through one of the carriers to protect against flooding? Report a claim to ever carrier under each policy that may apply.

Then find out how much coverage you might have and for what. You may have coverage for “living expense” to pay for lodging while your home is repaired. If your business was damaged, you may have coverage for lost revenue. Can you get a rental car? And for the purpose of repairs, you and your contractor must know how much is allotted to rebuild and repair.

If you have an agent, call them up. Or call the carrier itself to speak with a representative. Either way, read the policy! There is no substitute for educating yourself.

With this information, you can then do your best to maximize the total in your own pocket.

2. Report the Claim and Meet All Deadlines

Waste no time. Report the Claim ASAP to any carrier whose policy may cover the damage your property sustained. Many policies have strict timelines to report and for good reason. The carrier might wish to dispatch its adjuster to assess the damage while it is still fresh, or before secondary damage occurs (e.g. You do not need to wait to report a claim until you have all of the information. The claim can always be supplemented later with photos, reports, and an estimate for repair from your preferred contractors.

Then figure out all other deadlines that your policy might impose. Calendar them and never miss one. You do not want to give your carrier an excuse to reject your claim and blame you for it.

3. Inventory Damaged/Destroyed Contents

Your immediate impulse might be to throw out all of your ruined furniture onto the curb. But first, please inventory EVERY item that is destroyed. This is critical to later making your claim for reimbursement for each of these items. Pictures are good. A list with pictures is better.

You may then throw it all out. With adequate documentation of what was lost, a carrier or a future adjuster cannot demand or expect for a property-owner to save the damaged content. Similarly, a property owner need not have evidence of the original purchase.

4. Keep a Record of All Communications and Actions

Make sure that all your communications with the insurance company & contractors is IN WRITING. If you speak over the phone or  meet with either, send a polite email after restating the important decisions, topics covered, or plans made.

Just as importantly, keep a journal/diary of all events, dates, actions, costs, decisions, etc. that occur. Write down notes alongside each of these events that will serve as a log of what occurred. This will be critical for multiple reasons, not least of which to help you stay organized. Should there ever be litigation later on in the process, this will make your lawyer’s job that much easier.

5. Find Yourself a Contractor and Perhaps Your Own Adjuster

The adjuster can be your best friend, or biggest impediment to maximizing your claim. Some adjusters have all the experience in the industry, and will do you justice. Others have never held a hammer, but instead attended three days’ worth of a crash-course education. Yet, despite their zero experience in construction or even simple home maintenance, they are tasked with assessing the wide array of damage done to your property.

It is best to have your contractor there for the adjuster’s inspection. The hope is to assure that the adjuster sees the same damage as your contractor and concludes that your contractor’s list of recommended repairs (and price tag to do so) is accurate. If the adjuster reports to your carrier the same repairs recommended by your contractor, you’re doing great.
There may be more than one adjuster from the different carriers. And there may be a different one to assess your loss of contents.

6. Meeting the Adjuster

The adjuster can be your best friend, or biggest impediment to maximizing your claim. Some adjusters have all the experience in the industry, and will do you justice. Others have never held a hammer, but instead attended three days’ worth of a crash-course education. Yet, despite their zero experience in construction or even simple home maintenance, they are tasked with assessing the wide array of damage done to your property.

It is best to have your contractor there for the adjuster’s inspection. The hope is to assure that the adjuster sees the same damage as your contractor and concludes that your contractor’s list of recommended repairs (and price tag to do so) is accurate. If the adjuster reports to your carrier the same repairs recommended by your contractor, you’re doing great.

There may be more than one adjuster from the different carriers. And there may be a different one to assess your loss of contents.

7. After the Meeting

Remember Tip No. 4 above! After the adjuster leaves, send an email thanking him for his visit, and restating the key points/issues discussed and agreed upon (or the disagreements between you).

This contemporary, written log of what occurred, what was said and what was agreed upon will make it all the more difficult for either the adjuster to backtrack, or for the carrier to later disagree, deny, or under pay.

Then learn what will happen next and when and what is expected of you. Are you expected to take action? When will the carrier issue the first payment and for how much? Will the payment be made to you or your mortgage company? If the latter, then you will need to speak with your mortgagor.

8. Follow Up! Follow Up! Follow Up!

Do not expect this process to be on auto-pilot. And do not expect anyone besides you to care as much about your own property as you. Follow up with the adjusters, the contractors, the insurance representatives, etc. as needed. Do not drive them nuts. But remember the old adage: “the squeaky wheel gets the grease.”

9. Do Not Jump to Hire an Attorney

Read this article following the 2015 Memorial Day Flood in which it is advised to not hire an attorney too soon into the claims process.

In it, I strongly advise policy-holders to avoid involving an attorney in their claim for as long as possible. A solid attorney with experience in “First-Party Insurance” litigation can best help once you are at the end of the line with your claim, yet still facing problems from your carrier (e.g. underpayment, non-payment, late payment, wrongful denial of coverage, etc.). But you must first live up to all your responsibilities.

Involving an attorney before the insurance company denies your claim, or underpays it or otherwise wrongs you ensures that a portion of the carrier’s eventual payment will go to the attorney, rather than towards your recovery.

But should your insurance carrier fail to live up to its commitments under the policy (which is a contract!), then you should immediately speak to an attorney. You should never accept anything less than 100 cents of every dollar you are owed (well… perhaps I’d advise you to accept 95ȼ or more of every dollar if that’s what you were offered).

This article is re-purposed with permission from The Goldberg Law Office, PLLC.

Avoiding the Pitfalls of Filling Out a Lawyer’s Malpractice Insurance Application

Do’s, Dont’s and Nuances You May Not Be Aware of Whether you are a solo practitioner or managing partner at a law firm, you’ve made the wise decision to purchase lawyers’ professional liability (LPL) insurance, often referred to as malpractice insurance, to protect your firm from suits arising from your professional services as an attorney. […]