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 American Alternative policy provides a nonpracticing ERP based on the following policy language:
VI. COVERAGE EXTENSIONS
C. EXTENDED REPORTING PERIOD COVERAGES
1. Insured Eligibility for Extended Reporting Period Coverage: In order to be eligible for any Extended Reporting Period Coverage option, the Insured must be in full compliance with all of the terms, conditions, limitations and other provisions of this Policy. In addition, there is no right to any Extended Reporting Period Coverage option for any Insured that is no longer legally authorized to provide Professional Services, whether due to license revocation, suspension, surrender, termination, or any other reason, except if the Insured is Totally and Permanently Disabled. Finally, there is no right to any Extended Reporting Period Coverage Option if this Policy has been cancelled or non-renewed due to non-payment of premium, or any portion of the deductible remains outstanding, or for misrepresentation during the Application or underwriting process.
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4. Individual Insured Death Disability or Retiree Extended Reporting Period Coverage: If any individual lawyer or entity described in paragraph III.N.1. or paragraph III.N.4. (if applicable) of the Individual Insured definition of this Policy that is a current partner, principal, officer, director, stockholder, shareholder, member or employed lawyer of the Named Insured, and is also eligible for Extended Reporting Period Coverage according to the requirements of paragraph VI.C.1. of this section, then such an Individual Insured will have the right to purchase or elect an Individual Insured Death, Disability or Retiree Extending Reporting Period coverage, if such an Individual Insured also meets one of the additional eligibility requirements set forth in section VI.C.3.a. below. The Individual Insured Death Disability or Retiree Extended Reporting Coverage is subject to the following terms and conditions:
a. The Individual Insured must not have been the subject of any criminal or regulatory investigation or proceeding during the three (3) calendar years immediately prior to the date of election, and must also meet one of the following additional eligibility requirements in order to exercise an option for Individual Insured Death Disability or Retiree Extended Reporting Period Coverage:
1. The Individual Insured has permanently retired from providing Professional Services;
2. The Individual Insured has become Totally and Permanently Disabled; or
3. The Individual Insured had died, regardless of the cause of death.
b. The Individual Insured Death Disability or Retiree Extended Reporting Period Coverage will provide coverage for any Claim that is both first made and reported to the Company during its term, provided that the Wrongful Act forming the basis of the Claim occurred prior to the end of the Policy Period, and such Claim is otherwise covered under this Policy.
c. The Company must receive both a written notice of the Individual Insured Death Disability or Retiree Extended Reporting Period Coverage option being elected, as well as the appropriate premium if applicable, within sixty (60) days of the date the Individual Insured either retired, died or became Totally and Permanently Disabled. The written notice of election must include evidence that the Individual Insured has retired, died or became Totally and Permanently Disabled.
d. The Individual Insured Death Disability or Retiree Extended Reporting Period Coverage is non-cancellable, and the entire premium for any Individual Insured Death Disability or Retiree Extended Reporting Period option is deemed fully earned when paid.
e. The Individual Insured Death Disability or Retiree Extended Reporting Period Coverage is subject to, and a part of the Policy Limits of Liability and Deductible and will not increase either the Limits of Liability or Deductible.
f. The premium for the Individual Insured Death Disability or Retiree Extended Reporting Period Coverage is 150% of the expiring Individual Insured’s premium, but the additional premium charge will be waived if the Individual Insured has been Insured by the Company for at least three (3) continuous years.
III. DEFINITIONS
L. EXTENDED REPORTING PERIOD means one of the following: the Automatic Extended Reporting Period, an Optional Extended Reporting Period, or an Individual Insured Death, Disability or Retiree Extended Reporting Period.
N. INDIVIDUAL INSURED means:
1. Any individual lawyer, partnership, limited liability partnership, professional corporation, professional association, limited liability Company or limited liability partnership who is a current or former partner, principal, officer, director, stockholder, shareholder, member (if the Named Insured is an LLC) or employed lawyer of the Named Insured or a Predecessor Firm;
2. Any individual lawyer, partnership, limited liability partnership, professional corporation, professional association, limited liability Company or limited liability partnership who serves either as “Of Counsel” to the Named Insured, or as Independent Contractor; and
3. Any current or former non-lawyer employee of the Named Insured or a Predecessor Firm;
but only for Professional Services provided on behalf of the Named Insured or a Predecessor Firm.
O. INDIVIDUAL INSURED DEATH DISABILITY OR RETIREE EXTENDED REPORTING PERIOD means the period of time that begins on the date that the Individual Insured to whom the Individual Insured Death Disability or Retiree Reporting Period Coverage endorsement is issued either retired, died or became Totally and Permanently Disabled, and ends on the earlier of the following dates:
1. If the Individual Insured retired, the date such Individual Insured resumes performing Professional Services;
2. If the Individual Insured became Totally and Permanently Disabled, the date such Individual Insured recovers from such disability; or
3. If the Individual Insured died, on the date such Individual Insured’s executor, administrator, or personal representative is discharged.
BB. TOTALLY AND PERMANENTLY DISABLED means that an Insured has become so disabled as to be wholly prevented from performing Professional Services, provide that such disability:
1. has existed continuously for at least six (6) months; and
2. is reasonably expected to be continuous and permanent.
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