A law firm with claims, disciplinary activity, insurance coverage non-renewed, or rescinded, plan to provide insurance carrier loss runs for quoting and/or binding new coverage. Insurance carrier loss runs report(s) show claims reported to a malpractice insurer during the time the firm was insured with that insurer. Insurer claims and underwriting departments generate loss runs. The firm should obtain the loss runs directly from the insurer(s) or agent(s) that formerly wrote the malpractice insurance. Expect that all malpractice insurers that wrote your coverage in the last 5 years will need to supply loss runs. The firm may need to sign a release for loss runs. The loss runs typically show the claims (or if no made claims), date a claim is made, when the matter originated, amount reserved for claim (indemnity & expenses), amount paid for claim (indemnity & expenses), and whether it is open or closed. There is no standard format for loss runs or the data provided.
General commercial risk underwriters have long required loss runs on every account, but malpractice underwriters are more selective. However, malpractice underwriters are requesting insurance carrier loss runs with more frequency.
The uses for loss runs are:
1. Verify that the information on the application for claims reported and the amounts match. The firm may or may not know the total amount of claim damages or the claims expenses.
2. Verify the inventory of claims matches the application.
3. With new business underwriting, if the incumbent insurer’s premium seems out of line with the expiring premium, the loss runs verify that there are no hidden claims not disclosed by the firm.
4. With renewal accounts, if there were open past claims when first written by the current insurer, loss runs help underwriters see development to prior claim(s) over the past year and if still open.
5. Decline claims coverage for claims previously reported to another insurer (remember this is claims-made coverage).
Since past claims experience is one of the best predictors for future malpractice claims activity, the frequency and severity of claims is a key malpractice insurance underwriting component. Underwriters may not even a give ballpark premium number for firms with reported claims without this vital tool.
Lee Norcross, MBA, CPCU
Managing Director, CEO
(616) 940-1101 Ext. 7080