Disciplinary Coverage is an additional coverage found on most admitted and some non-admitted Legal Malpractice Insurance policies. Some insurers that do not offer this coverage as part of their standard policy are willing to endorse it on if requested.
With Legal Malpractice Insurance policies not being standard, this additional coverage has names like ‘Additional Coverages’, ‘Supplemental Payments’ , ‘Disciplinary Proceedings’, ‘Regulatory Inquiry Extension’ or related names either in the body of the policy or as an endorsement to the policy.
Disciplinary Coverage is a defense only coverage; it will not indemnify for any fines or sanctions that are levied against the attorney or firm. Disciplinary Coverage normally is not considered ‘damages’ which means it will not reduce your liability policy limits. It is also not normally subject to the policy deductible. Limits for this coverage usually range from $5000 to $100,000 and can be for each incident, for the policy period or some combination in between.
Most Legal Malpractice Insurance policies are ‘duty to defend’, but this does not always mean that the disciplinary coverage is ‘duty to defend’. With ‘duty to defend’ disciplinary coverage once the matter is reported to the insurer, the insurer is responsible for providing counsel and pays defense costs up to the limits stated. Generally the insurer in consultation with the attorney will appoint counsel to handle the defense.
Some Legal Malpractice Insurance policies offer ‘Reimbursement’ coverage for Disciplinary Matters. In this case the attorney needs to find counsel to defend the matter and will be reimbursed for the cost of defense. Further limiting the insurer’s liability, some ‘Reimbursement’ policies will only pay the defense costs if there is no finding against the attorney.
With the average cost to defend a disciplinary matter approaching $20,000 this is essential coverage. So even if your Legal Malpractice Insurance policy has ‘Disciplinary Coverage’, it is important for you to read and understand what your policy truly covers. All Attorney Malpractice Insurance policies are not created equally. ‘Reimbursement’ Disciplinary Coverage that only pays if the attorney is ‘innocent’ could lead to thousands of dollars of unreimbursed legal expenses.
Lee Norcross, MBA, CPCU
Managing Director, CEO
(616) 940-1101 Ext. 7080