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 CNA policy provides a nonpracticing ERP based on the following policy language:
VI. EXTENDED REPORTING PERIODS
As used herein, “extended reporting period” means the period of time after the end of the policy period for reporting claims that are made against the Insured during the applicable extended reporting period by reason of an act or omission that occurred prior to the end of the policy period and is otherwise covered by this Policy.
C. Death or disability extended reporting period
1. If an 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 automatic or optional extended reporting period, such Insured shall be provided with a death or disability extended reporting period as provided below.
a. In the event of death, such Insured‘s estate, heirs, executors or administrators must, within sixty (60) days of the expiration of the policy period, provide the Company with written proof of the date of death.
b. If an Insured becomes totally and permanently disabled, such Insured or Insured‘s legal guardian must, within sixty (60) days of the expiration of the policy period, provide the Company with written proof that such Insured is totally and permanently disabled, including the date the disability commenced, certified by the Insured‘s physician. The Company retains the right to contest the certification made by the Insured‘s physician, and it is a condition precedent to this coverage that the Insured agree to submit to medical examinations by any physician designated by the Company at the Companyʼs expense. This extended reporting period is provided until such Insured shall no longer be totally or permanently disabled or until the death of such Insured in which case subparagraph a. hereof shall apply.
2. No additional premium will be charged for any death or disability extended reporting period.
D. Non-practicing extended reporting period
1. If an Insured retires or otherwise voluntarily ceases, permanently and totally, the “private practice of law” during the policy period and has been continuously insured by the Company for at least three (3) consecutive years, then such Insured shall be provided with an extended reporting period commencing upon the latter of the expiration of: the policy period; any renewal or successive renewal of this Policy; or any automatic or optional extended reporting period.
2. This extended reporting period is provided until such Insured shall resume the “private practice of law” or until the death of such Insured in which case subparagraph C.1.a. hereof shall apply.
3. No additional premium will be charged for any non-practicing extended reporting period.
As used herein, the “private practice of law” means the practice of law performed by an Insured for a fee, including hourly, contingent or lump sum, as a sole practitioner or as a partner, officer, director, stockholder-employee, associate, manager, member or employee, of a law firm, or any agreement to act as an independent contractor or “Of Counsel” to a law firm. “Private practice of law” does not include the practice of law by an Insured on an eleemosynary (a pro bono) basis or services performed by an Insured solely as a mediator or arbitrator.
E. Extended reporting periods limits of liability and deductibles
1. Automatic and optional extended reporting periods limits of liability and deductibles
a. Where the Company has the right to nonrenew or cancel this Policy, and it exercises that right, then the Company‘s liability for all claims reported during the automatic and optional extended reporting periods shall be part of and not in addition to the limits of liability for the policy period as set forth in the Declarations and Section II.A. and B. of this Policy. The deductible applicable to such claims shall be part of and not in addition to the deductible as set forth in the Declarations and Section II.C. of this Policy.
b. If this Policy is canceled by the Named Insured or if the Company offers to renew this Policy, and the Named Insured refuses such renewal offer, then the Company’s liability for all claims reported during the automatic and optional extended reporting periods shall be reinstated to the limits of liability applicable to this Policy as set forth in the Declarations and Section II.A. and B. of this Policy. The deductible applicable to such claims shall be reinstated to an amount equal to the deductible as set forth in the Declarations and Section II.C. of this Policy.
2. Separate death or disability and non-practicing extended reporting period limits of liability
a. Limit of Liability – Each “Claim”
Subject to paragraph B. below, the Company’s limit of liability for each claim first made against the Insured and reported to the Company during the death or disability extended reporting period or non-practicing extended reporting period shall not exceed the amount stated in the Declarations as the “Each Claim Death or Disability and Non-Practicing extended reporting period limit of liability”.
b. Limit of Liability – In the Aggregate
The limit of liability of the Company for all claims first made against the Insured and reported to the Company during the death or disability extended reporting period or non-practicing extended reporting period shall not exceed the amount stated in the Declarations as the “Aggregate Death or Disability and Non-Practicing extended reporting period limit of liability”.
c. No Deductible
No deductible shall apply to claims first made against the Insured and reported to the Company during the death or disability extended reporting period or non-practicing extended reporting period.
F. Elimination of right to any extended reporting period
There is no right to any extended reporting period:
1. if the Company shall cancel or refuse to renew this Policy due to:
a. non-payment of premiums; or
b. non-compliance by an Insured with any of the terms and conditions of this Policy; or
c. any misrepresentation or omission in the application for this Policy; or,
2. if during the Policy Period such Insured’s right to practice law is revoked, suspended or surrendered at the request of any regulatory authority for reasons other than that the Insured is totally and permanently disabled.
G. Extended reporting period not a new policy
It is understood and agreed that the extended reporting period shall not be construed to be a new policy and any claim submitted during such period shall otherwise be governed by this Policy.
III. DEFINITIONS
“Insured” means the Named Insured, predecessor firm and the persons or entities described below:
A. any lawyer (including a government affairs advisor or lobbyist), partnership, professional corporation, professional association, limited liability company or limited liability partnership who is or becomes a partner, officer, director, stockholder-employee, associate, manager, member or employee of the Named Insured during the policy period shown in the Declarations;
B. any lawyer previously affiliated with the Named Insured or a predecessor firm as a partner, officer, director, stockholder-employee, associate, manager, member or salaried employee but only for legal services performed on behalf of the Named Insured or a predecessor firm at the time of such affiliation.
C. The term “previously affiliated” as used herein does not include a lawyer who, during the policy period and while affiliated with the Named Insured: a) voluntarily ceases, permanently and totally, the private practice of law; or b) dies or becomes totally and permanently disabled. Such lawyer will be deemed to be an Insured under paragraph A. above;
D. any lawyer, law firm, partnership, professional corporation, professional association, limited liability company or limited liability partnership who acts as Of Counsel to the Named Insured or any nonemployee independent contractor attorney to the Named Insured, but only for legal services rendered on behalf of the Named Insured and only if a fee inured or, in the event of a contingency fee, would have inured, to the Named Insured. No fee need inure to the Named Insured where eleemosynary (pro bono) legal services are rendered by such Of Counsel Insured where at the time of retention, there was approval by the appropriate committee or lawyer within the Named Insured that the matter would be handled without compensation. Any lawyer, law firm, partnership, professional corporation, professional association, limited liability company or limited liability partnership who previously qualified as an Insured under paragraph A. above, but gave up the position of partner, officer, director, stockholder-employee, associate, manager, member or employee to act exclusively as Of Counsel to the Named Insured, will be deemed to be an Insured under paragraph A. above;
E. any person who is a former or current employee, other than an employed lawyer, of the Named Insured or any predecessor firm, but solely for services performed by such person within the course and scope of their employment by the Named Insured or any predecessor firm and provided that the services in dispute are legal services of the Named Insured or any predecessor firm;
F. the estate, heirs, executors, administrators, assigns and legal representatives of an Insured in the event of such Insured’s death, incapacity, insolvency or bankruptcy, but only to the extent that such Insured would have been provided coverage under this Policy; and
G. the spouse or domestic partner of an Insured, but only to the extent that such Insured is provided coverage under this Policy.
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