Attorney Malpractice Insurance Policies are claims-made and reported policies. When the coverage ends the ability to report claims for past acts ends at policy termination. Attorneys leaving private practice via retirement, becoming a judge or working in the private or public sector need to protect their past acts. Insurers will not renew attorney malpractice policies for attorneys that are no longer in private practice. Given this it is important for attorneys to protect their past acts once coverage ends. For solo practitioners and small firms that may close once the practitioner leaves, the nonpracticing Extended Reporting Period Endorsement/Retirement Tail (ERP) may be an answer.
Note: For attorneys closing or leaving their small firm to work at another law firm the nonpracticing Extended Reporting Period Endorsement/Retirement Tail (ERP) is not an option. Coverage for their past acts is outside of the scope of this blog.
Each insurer’s policy differs on requirements and wording for obtaining this valuable ERP endorsement at no or reduced cost. Careful planning by the attorney may save the attorney thousands of dollars. The ability to request an ERP differs by insurer but is time sensitive. Regardless of the insurer, the attorney must completely stop private practice to obtain the nonpracticing ERP.
The Everest policy provides a nonpracticing ERP based on the following policy language:
SECTION VII – EXTENDED REPORTING PERIOD
C. Non-Practicing Extended Reporting Period
If an Insured as defined in Section XX.M.2 retires, or otherwise voluntarily ceases, permanently and totally, the Private Practice Of Law during the Policy Period, then such Insured shall have the right, upon payment of the additional premium as set forth in ITEM 7 of the Declarations, to purchase an Extended Reporting Period as set forth as set forth in ITEM 7 of the Declarations, to commence upon the latter of the expiration of the Policy Period, any renewal or successive renewal of this Policy or any optional Extended Reporting Period, but only for Wrongful Acts taking place on or after the Retroactive Date and prior to the effective date of the retirement or cessation.
This right of extension will lapse unless written notice of such election, together with payment of the additional premium, is given by the Insured to the Insurer within sixty (60) days following the effective date of retirement or cessation. The entire additional premium for the non-practicing Extended Reporting Period will be deemed fully earned at inception of the Extended Reporting Period; provided there shall be no additional premium for any Extended Reporting Period elected up to three (3) years if the Insured retires or ceases the Private Practice of Law during the Policy Period and has been insured by the Insurer under a primary lawyers professional liability policy for at least three (3) consecutive years.
This Extended Reporting Period is provided until such Insured resumes the Private Practice of Law or until the death of such Insured in which case paragraph D below applies.
D. Upon Death or Disability Extended Reporting Period
If a natural person Insured dies or becomes Totally and Permanently Disabled during the Policy Period, then upon the latter of the expiration of the Policy Period, any renewal or successive renewal of this Policy, or any optional Extended Reporting Period, such Insured shall be provided with a death or disability Extended Reporting Period as provided below:
1. In the event of death, the estate, heirs, executors or administrators of such Insured must provide the Insurer with written proof of the date of death. This Extended Reporting Period is provided to the estate, heirs, executors and administrators of such Insured until the executor or administrator of the estate of such Insured is discharged, but only with respect to any Wrongful Act of such Insured committed in their capacity as such.
2. If an Insured becomes Totally and Permanently Disabled, such Insured or Insured’s legal guardian must provide the Insurer with written proof that such Insured is Totally and Permanently Disabled, including the date the disability commenced, certified by the Insured’s physician. The Insurer retains the right to contest the certification made by the Insured’s physician.
No additional premium will be charged for any death or disability Extended Reporting Period.
E. All Extended Reporting Period Options
1. As a condition precedent to the right to purchase an Extended Reporting Period, the total premium that is due shall be paid within sixty (60) days of the effective date the cancellation or non-renewal.
2. No Extended Reporting Period is available to any Insured who is disbarred, suspended or resigns from the Private Practice of Law in lieu of suspension, in any state where the Insured has a license or right to practice law.
3. There shall be no coverage for any Claims otherwise subject to coverage under this Section VII.A-D, if there is any other insurance in effect that would apply to such Claims.
4. No Extended Reporting Period is renewable.
5. The Limit of Liability applicable to any Extended Reporting Period shall be part of, and not in addition to, the Limit of Liability for the Policy Period and the fact that the coverage provided by this Policy may be extended by the purchase of the Extended Reporting Period shall not in any way renew, replenish or increase the Aggregate Limit of Liability stated in ITEM 3.A of the Declarations nor change the scope of coverage available under this Policy.
6. An offer of renewal terms, conditions or premiums different from those in effect prior to renewal shall not constitute a refusal to renew for purposes of this extension of coverage.
7. All notices and premium payments made under this section shall be submitted to the Insurer by the Named Insured.
SECTION XX – DEFINITIONS
L. Extended Reporting Period means the period of coverage as shown in ITEM 7 of the Declarations.
M. Insured means:
1. the Named Insured shown in the Declarations or any Predecessor;
2. any past, present or future partner, officer, director, shareholder, attorney, or member of the Named Insured but only with respect to Professional Services rendered on behalf of the Named Insured or any Predecessor;
3. an attorney acting as “Of Counsel” but only while performing Professional Services on behalf of the Named Insured;
4. all non-lawyer employees, interns, volunteers or independent contractors but only with respect to liability arising from and in the course of their services on behalf of the Named Insured or any Predecessor; and
5. the estates, heirs, executors, administrators, assigns and legal representatives of a natural person Insured in the event of such Insured’s death, incapacity, insolvency or bankruptcy, but only in their capacity as such, and only to the extent that such Insured would otherwise be provided coverage under the Policy.
CC. Totally and Permanently Disabled means that the Insured has become so disabled as to be wholly unable to provide any Professional Services in such Insured’s capacity and such disability has existed continuously for not less than six (6) months and is expected to be continuous and permanent. Totally and Permanently Disabled shall not include any condition which:
1. is a result of war or acts of war, whether or not declared;
2. occurred during active service in the armed forces of any country; or
3. results from:
a. intentionally self-inflicted Injuries; or
b. attempted suicide, whether or not sane; or the abuse or misuse of an addictive substance.
Switching insurers near retirement to save a few dollars may cost an insured attorney thousands of dollars to buy the same protection. Planning retirement or a transition out of private practice should be discussed with your malpractice insurance agent prior to ending private practice when possible.
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Lee Norcross, MBA, CPCU
Managing Director, CEO
(616) 940-1101 Ext. 7080