This is a frustration shared by firms that have changed their practice to lower risk AOPs (Areas of Practice). At renewal, the premium did not go down. The firm with prior higher risk AOPs will not see a rate reduction for another year.
Legal malpractice insurance applications capture firm history. The renewal application asks what happened in the prior year, not what is planned for the current year. As attorney malpractice insurance is written on a claims-made policy form, your current enforce claims-made malpractice policy not only covers reported covered acts that occur in the current year but also reported covered acts that occurred in the past. That is why it is important to maintain your prior acts date. Most reported attorney malpractice claims made are for acts that occur in prior policy years. A claims-made policy form is designed to handle these claims. Remember that the claims-made policy that is enforce at the time the claim is made is the policy will cover the claim, not the policy that was enforce when the act occurred. Do not confuse these with your occurrence policy forms which are used for home, auto, and business insurance.
With the long possible lead times between when the act occurred and when a claim might be reported, no insurers currently write an attorney malpractice policy on an occurrence policy form.
Given claims-made coverage’s retrospective nature, rating the law firm for what was done and not what is planned more accurately reflects the exposure. This frustrates many an attorney that is expecting an immediate premium cost reduction for current or future changes.
Lee Norcross, MBA, CPCU
Managing Director, CEO
(616) 940-1101 Ext. 7080