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 StarStone policy provides a nonpracticing ERP based on the following policy language:
SECTION VIII – AUTOMATIC EXTENDED REPORTING and EXTENDED REPORTING OPTIONS
C. Nonpracticing Extended Reporting Period:
1. Eligibility
a. The provisions of this subsection entitled “Nonpracticing Extended Reporting Period” apply to any lawyer employed by the Named Insured (hereinafter referred to as “you” or “your”) who falls within the definition of “Insured” set forth in SECTION II Item C., but not to such lawyers acting as “of counsel”, as independent contractors, or as lawyers contracting on a per diem basis.
b. If you retire or otherwise cease the private practice of law during the Policy Period, then you have the option to extend the insurance afforded by this policy subject otherwise to its terms, limits of liability, exclusions and conditions. Such extension (hereinafter, “Nonpracticing Extended Reporting Period”) shall apply to Claims first made against you during the period of months as purchased immediately following the effective date of such retirement or cessation of private practice, or the effective date of this policy’s cancellation, if sooner (hereinafter, “Effective Date”), but only for any act, error, omission or Personal Injury in the rendering of or failure to render Professional Services committed by you after the Retroactive Date and before such Effective Date and otherwise covered by this insurance, provided there is no other insurance in effect on or after such Effective Date which covers you for such liability or Claim.
2. A specific Nonpracticing Extended Reporting Period must be purchased by you. For each of you purchasing the Nonpracticing Extended Reporting Period, the premium is:
a. 100% of the full annual premium for this policy, for a period of twelve (12) months; or
150% of the full annual premium for this policy, for a period of twenty-four (24) months; or
185% of the full annual premium for this policy, for a period of thirty-six (36) months; or
210% of the full annual premium for this policy, for a period of forty-eight (48) months; or
225% of the full annual premium for this policy, for a period of sixty (60) months; or
300% of the full annual premium for this policy, for an unlimited period;
modified by the number of you purchasing the Nonpracticing Extended Reporting Period divided by the total number of lawyers in the Named Insured.
b. The Company will waive the premium for any Nonpracticing Extended Reporting Period if you:
(1) die, except by suicide; or
(2) become totally and permanently disabled; or
(3) retire or otherwise cease the private practice of law;
during the Policy Period and have been insured by the Company under a Lawyers’ Professional Liability Insurance Policy continuously for the last three (3) full years..
c. The Deductible amount and Deductible provisions of this policy will be waived with respect to Claims first made against you during the Nonpracticing Extended Reporting Period, if purchased by you.
3. Nonpracticing Extended Reporting Period Limits of Liability
a. The limits of liability applicable to any and all Nonpracticing Extended Reporting Periods provided under the policy will be part of and not in addition to the limits of liability stated in the Declarations. The purchase of any Nonpracticing Extended Reporting Periods will not increase the limits of liability stated in the Declarations, which shall be the Company’s maximum liability for the Policy Period and all Nonpracticing Extended Reporting Periods combined regardless of the number of Nonpracticing Extended Reporting Periods purchased.
b. If other insurance exists which covers Claims first made during the Nonpracticing Extended Reporting Period, the coverage provided under this policy for the Nonpracticing Extended Reporting Period will not apply.
4. Purchasing the Nonpracticing Extended Reporting Period
a. As a condition precedent to the Your right to elect the Nonpracticing Extended Reporting Period, any and all premium and Deductibles that are due must have been paid and you must have complied with all other terms and conditions of this policy.
b. The Nonpracticing Extended Reporting Period will not be available if you are disbarred, suspended or resign in lieu of suspension in any state or court where you have a license or have a right to practice.
c. Your right to purchase the Nonpracticing Extended Reporting Period must be exercised by notice in writing to the Company not later than thirty (30) days after the effective date of your retirement or cessation of private practice, or not later than the effective date of this policy’s cancellation, if sooner, even if the Company has waived the premium pursuant to Item C.2.b. above. Such notice must indicate the date of your retirement or cessation of private practice and must include payment of the entire premium, if any, for such Nonpracticing Extended Reporting Period. You may not change the option purchased once that has been purchased. At the commencement of any Nonpracticing Extended Reporting Period you purchase, the entire premium shall be deemed earned and the Company shall not be liable to return to the Insured any portion of the premium for any Nonpracticing Extended Reporting Period.
SECTION VII – DEFINITIONS
F. Insured means any person or organization qualifying as an Insured under SECTION II – Insureds, of this policy. The insurance afforded applies separately to each Insured against whom a Claim is made or Suit is brought except with respect to the limits of liability.
G. Named Insured means the person or organization named in Item 1. of the Declarations Page.
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