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 Freedom Insurance Company policy provides a nonpracticing ERP based on the following policy language:
I. Extended Reporting Period Options
3. Non-Practicing Extended Reporting Period
If you are a sole practitioner and during the policy period you permanently cease professional practice for reasons not related to suspension or revocation of your license or death or disability as described in CONDITIONS VI.I.4. below, we will provide a non-practicing extended reporting period as set forth below.
a. The non-practicing extended reporting period will start with the date you cease professional practice and ends when one of the following occurs:
(1) you resume professional practice; however, you may purchase, at our option, a policy from us to reinstate full prior acts coverage;
(2) any insurance is issued which replaces, in whole or in part, the coverage afforded by the non-practicing extended reporting period; or
(3) the limits of liability have been exhausted.
b. The additional premium for this option shall be waived if you are a sole practitioner and have been continuously insured by us or via LawGold™ under a professional liability insurance policy for at least three consecutive years prior to such cancellation or nonrenewal and are at least fifty-five (55) years of age at the time you cease professional practice.
c. We will issue a non-practicing extended reporting period endorsement only if:
(1) you request the endorsement no more than sixty (60) days after the date you cease professional practice, or sixty (60) days after the end of the policy period, whichever is earlier. Such request must include written notification of your cessation of professional practice;
(2) you have paid all premiums due for this policy at the time you request a nonpracticing extended reporting period endorsement; and
(3) you promptly pay when due the additional premium for the endorsement.
4. Death or Disablement Extended Reporting Period
a. If, during the policy period, any of you die or become totally and permanently disabled, we will extend a death or disablement extended reporting period at no charge. Totally and permanently disabled means that you have become so disabled as to be completely prevented from rendering professional services, and such disability:
(1) has existed for not less than ninety (90) consecutive days; and
(2) is expected to be continuous, total, and permanent.
b. The death or disablement extended reporting period will start on the date you die or become totally and permanently disabled, and will end when one of the following occurs:
(1) the executor or administrator of your estate has been discharged;
(2) the total and permanent disability ends, whether or not you resume practice;
(3) any insurance is issued which replaces, in whole or in part, the coverage afforded by the death or disablement extended reporting period; or
(4) the limits of liability have been exhausted.
c. We will issue a death or disablement extended reporting period endorsement only if you or your representative request it no more than ninety (90) days after the date of your death or total permanent disability, or ninety (90) days after the end of the policy period, whichever is the later. Such request must include:
(1) a copy of the certified death certificate; or
(2) written proof, certified by your attending physician, of total permanent disability including the date it occurred;
5. Applicable to all extended reporting periods
The extended reporting periods:
a. do not change the scope of coverage provided. The extended reporting periods only apply to claims resulting from covered acts committed before the end of the policy period and on or after the retroactive date, if any, shown in the Declarations;
b. do not reinstate or increase the limits of liability;
c. are not renewable; and
d. cannot, once in effect, be canceled. We need not return any part of the premium paid for any reason whatsoever.
IV. DEFINITIONS
N. Extended reporting period means the period of time after the end of the policy period for reporting claims arising out of covered acts occurring during the policy period. Terms and conditions relating to the purchase of an extended reporting period endorsement are set forth in CONDITIONS VI.I.
EE. You or your means the named insured and any person which was, is or becomes any of the following:
1. a partner, principal, director, member, officer or shareholder, employed lawyer, or patent agent of you but only while acting on your behalf;
2. a patent agent for which you are legally liable but only while acting on your behalf;
3. your employee or leased or temporary employee of you but only while acting on your behalf;
4. an incorporated partner, including the shareholders thereof;
5. any other person or law firm who is a lawyer and who is: (a) designated as “counsel” or “of counsel” to or (b) engaged as an independent contractor or on a per diem basis by you, but in either case only while acting on your behalf; and
6. the estate, heirs, executors, administrators, assigns, and legal representatives of any person or law firm who previously qualified as you in the event of your death, incapacity, insolvency, or bankruptcy but only to the extent that you would otherwise be provided coverage under this policy.
7. the lawful spouse of any of you solely by reason of:
a. spousal status; or
b. a spouse’s ownership interest in property or assets that are sought as recovery. This definition shall not apply to the extent a claim alleges any wrongful act by such spouse. In all events, coverage as afforded with respect to a claim made against you will only apply to covered acts committed or allegedly committed by you on or after the date you joined the named insured and prior to the time you ceased to be a partner, principal, director, officer, shareholder or employee of the named insured.
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.
CLICK HERE TO OBTAIN AN ATTORNEY MALPRACTICE QUOTE
Lee Norcross, MBA, CPCU
Managing Director, CEO
(616) 940-1101 Ext. 7080