More than a few attorneys forget to take advantage of Disciplinary Coverage until it is too late. Attorney Malpractice Insurance policies that offer this coverage can be ‘Duty to Defend’ or ‘Reimbursement’. Even though the American Alternative policy’s malpractice coverage is ‘Duty to Defend’, the disciplinary coverage is ‘Reimbursement’. Insurer’s wording for disciplinary coverage and reporting differs by carrier. The disciplinary reimbursement is not subject to the policy deductible.
From Declarations page:
Item 6 SUPPLEMENTARY PAYMENTS:
1. Disciplinary Proceedings Reimbursement:
a. Limit Per Proceeding: $50,000
b. Aggregate Limit Per Policy: $100,000
Policy Coverage:
E. SUPPLEMENTARY PAYMENTS
1. Disciplinary Proceedings Reimbursement: The Company will reimburse the Named Insured up to the amount shown in the Declarations as the Per Proceedings Limit for Disciplinary Proceeding Reimbursement, for all Insureds in the aggregate for attorney fees for any Defense Counsel, and other reasonable and necessary costs, expenses or fees paid to any third party in the investigation or defense of any Disciplinary Proceeding arising from the Wrongful Acts of any Insured while performing Professional Services, for which notice is first received by the Insured and reported to the Company during the Policy Period. The maximum amount the Company will reimburse under this provision for all attorney fees, costs, expenses and third-party fees, regardless of the number of Insureds involved or the number of Disciplinary Proceedings reported, is amount shown in the Declarations as the Disciplinary Proceedings Reimbursement Aggregate Limit per Policy.
Claim Expenses and Damages arising from a Wrongful Act underlying a Disciplinary Proceeding, are not reimbursable under this Disciplinary Proceedings Reimbursement Supplementary Payment and are subject to the Per Claim Limit, Deductible and Aggregate Limit of Liability applicable to that Claim.
Policy Definition:
K. DISCIPLINARY PROCEEDING means any pending or open matter, including an initial inquiry, before a federal, state or local licensing board, peer review committee or other regulatory body with authority over the legal profession, relating to potential violations of professional codes, rules or regulations.
Not taking advantage of this policy coverage does not make sense. Firms have a fear that reporting disciplinary complaints can impact their attorney malpractice insurance premiums. While too many disciplinary reported complaints that do not result in an issue can cause problems. Not reporting issues that may lead to a proceeding may impact your malpractice insurance should the same issue turn into a malpractice claim at a later date. The other issue is that once a year you may need to attest on the renewal application that there are no disciplinary issues.
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Lee Norcross, MBA, CPCU
Managing Director, CEO
(616) 940-1101 Ext. 7080