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 Zurich policy provides a nonpracticing ERP based on the following policy language:
VI. EXTENDED REPORTING PERIOD OPTIONS
B. NON-PRACTICING EXTENDED REPORTING PERIOD
1. If an Insured, as defined in Subsection VIII.L.2., after being continuously insured by the Company for 3 or more consecutive years:
a. Retires from the practice of law during the Policy Period; and
b. Ceases the performance of all Legal Services covered by this Policy;
then such Insured has the right, upon payment to the Company or any of its authorized agents of an additional premium, if applicable, within 30 days of such retirement and the ceasing of performance of Legal Services covered by this Policy, to extend the period for reporting Claims first made or Disciplinary Proceedings first initiated against such Insured during the Policy Period or the Non-Practicing Extended Reporting Period, if purchased, after the Termination of the Policy Period for any actual or alleged act or omission, Security Wrongful Act or Privacy Wrongful Act occurring prior to the Termination of the Policy Period and otherwise covered by this Policy.
2. Such an Insured has the right to purchase a three (3) year Non-Practicing Extended Reported Period, a 6 year Non-Practicing Extended Reporting Period, or an unlimited Non-Practicing Extended Reporting Period. The premium for the Non-Practicing Extended Reporting Period shall be computed in the following manner:
a. The Full Term Annual Premium, less any Extended Reporting Period premium previously paid by an Insured during this Policy Period, shall be divided by the sum of the total number of full time and part time lawyers to obtain the calculated premium for one Insured.
b. The calculated premium from Subsection VI.B.2.a. above shall be applied as follows for:
(1) A 3 year Non-Practicing Extended Reporting Period, there is no premium charge;
(2) A 6 year Non-Practicing Extended Reporting Period, the premium for one non-practicing lawyer is 100% of the calculated premium from Subsection VI.B.2.a. above; or
(3) An unlimited Non-Practicing Extended Reporting Period, the premium for one non-practicing lawyer is 150% of the calculated premium from Subsection VI.B.2.a. above.
c. To calculate the premium for more than one non-practicing lawyer, multiply the premium from Subsection VI.B.2.b. above for the applicable length of Non-Practicing Extended Reporting Period by the total number of non-practicing lawyers.
3. The premium for the unlimited Non-Practicing Extended Reporting Period will be waived for:
a. Any Insured who is leaving the private practice of law and ceases the performance of all Legal Services covered by this Policy to become either a state or federal judge or magistrate; or
b. The Named Insured who retires from the practice of law and ceases the performance of all Legal Services covered by this Policy, but only if the Named Insured contains only one lawyer during the Policy Period and Subsections VI.B.3.b.(1), (2) or (3) below applies:
(1) Is at least 55 years of age and has been continuously insured for at least 7 consecutive years under a Lawyers’ Professional Liability Claims Made Policy issued by:
(a) The Company; or
(b) Another professional liability carrier, but only if such policy was underwritten through a representative authorized by the Company; or
(2) Is at least 56 years of age and has been continuously insured for at least 6 consecutive years under a Lawyers’ Professional Liability Claims Made Policy issued by:
(a) The Company; or
(b) Another professional liability carrier, but only if such policy was underwritten through a representative authorized by the Company; or
(3) Is at least 57 years of age and has been continuously insured for at least 5 consecutive years under a Lawyers’ Professional Liability Claims Made Policy issued by:
(a) The Company; or
(b) Another professional liability carrier, but only if such policy was underwritten through a representative authorized by the Company.
The premium waiver is available only if written notification of this election is given to the Company within 30 days after retiring or ceasing the performance of all Legal Services covered by this Policy and all premiums and deductible payments due the Company have been paid in full.
C. DEATH OR DISABILITY OF AN INSURED EXTENDED REPORTING PERIOD
If an Insured, as defined in Subsection VIII.L.2. or an Insured that is added to the Policy within 30 days of the inception of the Policy Period, dies during the Policy Period, such Insured shall be provided with a Death Extended Reporting Period commencing after the Termination of the Policy Period at no additional premium until the executor or administrator of the estate is discharged, provided always that the death did not result from an intentionally self-inflicted injury, suicide or alcohol or drug abuse, and provided always that written notification and written proof of death of the Insured is provided within 60 days of the date of death or prior to the Termination of the Policy Period, whichever is earlier.
If an Insured becomes Totally and Permanently Disabled during the Policy Period, such Insured shall be provided with a Disability Extended Reporting Period commencing after the Termination of the Policy Period at no additional premium until the Insured is no longer Totally and Permanently Disabled.
To be eligible for the Disability Extended Reporting Period, the Insured:
1. Must have had continuous coverage with the Company for at least 3 consecutive prior full years;
2. The Insured’s legal guardian must provide written notice of the disability to the Company prior to the Termination of the Policy Period; and
3. The Insured’s legal guardian must provide a licensed physician’s written certification of the disability, including the date it began.
The Disability Extended Reporting Period will terminate upon the resumption of the Insured’s ability to render Legal Services. As a condition of and as consideration for the Disability Extended Reporting Period, the Insured agrees to give notice of the termination of the Insured’s total and permanent disability within 60 days of either the return to work or the date a licensed physician determines that the Insured is not Totally and Permanently Disabled.
D. ALL EXTENDED REPORTING PERIOD OPTIONS
1. The right to any of the Extended Reporting Period options is not available:
a. To any Insured where cancellation or non-renewal by the Company is due to nonpayment of premium, Deductible, or other money due to the Company; or
b. To the Insured if such Insured has had his or her license to practice law suspended or revoked, or has relinquished his or her license to practice law in connection with or as a result of a criminal or disciplinary action.
2. The Aggregate Limit of Liability available for any Extended Reporting Period is part of, and not in addition to, the applicable Limit of Liability set forth on the Declarations. The applicable Deductible will apply separately to each and every Claim brought under any Extended Reporting Period option. The Deductible will be waived in the event of the death of the Insured or in the event the Insured becomes Totally and Permanently Disabled.
3. None of the Extended Reporting Periods are cancellable, except for non-payment of premium or Deductible. None of the Extended Reporting Periods are renewable. The additional premium for the Extended Reporting Period is fully earned at the inception of the Extended Reporting Period.
VIII. DEFINITIONS
L. Insured means:
1. The Named Insured;
2. Any lawyer or entity listed in the application on the day the Policy Period incepts until such time as the lawyer or entity ceases to be a member of the Named Insured subject to Subsection VIII.L.4. below;
3. Any lawyer or entity who becomes a partner, officer, director, stockholder or shareholder or employee of the Named Insured during the Policy Period until such time as the lawyer or entity ceases to be a member of the Named Insured subject to Subsection VIII.L.4. below;
4. Any lawyer or entity who is a former partner, officer, director, stockholder, shareholder or employee of the Named Insured or Predecessor Firm, but only in connection with such lawyer’s or entity’s rendering of or failing to render Legal Services on behalf of the Named Insured or Predecessor Firm;
5. Any lawyer or entity who is designated by the Named Insured as counsel or of counsel in the application, but only in connection with such lawyer’s or entity’s rendering of or failing to render Legal Services on behalf of the Named Insured;
6. Any other person who is employed or retained by the Named Insured as a legal secretary, paralegal, contract attorney or other legal office staff member, but only in connection with such person’s rendering of or failing to render Legal Services on behalf of the Named Insured and also only within the scope of such employment or retention agreement; and
7. The estate, heirs, executors, administrators, assigns and legal representatives of any Insured in the event of such Insured’s death, incapacity, insolvency or bankruptcy, but only to the extent that such Insured would otherwise be provided coverage under this Policy.
Q. Named Insured means the entity or individual set forth in Item 1. of the Declarations.
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