The reality of attorney malpractice insurance policies is paying the deductible when a claim is made against the law firm. For an additional premium Insurers may offer for 1st dollar defense which addresses claims expenses for claims with no indemnity payment made or an aggregate deductible for multiple claims brought in any one policy year. But insurers may also have features built into their policies that reduce your deductible obligation. Valuable policy features mean that there is more than policy premiums that should be compared prior to making an insurer coverage decision. As every law firm is unique, policy features important to one insured are not important to another insured.
Deductible reducing features with the CNA policy are:
II. LIMITS OF LIABILITY AND DEDUCTIBLE
C. Deductible
The deductible amount stated in the Declarations is the total amount of the Insuredʼs liability for all claims and applies to the payment of damages and claim expenses for claims first made and reported to the Company in writing during the policy period. The deductible shall be paid by the Named Insured, or upon the Named Insuredʼs failure to pay, jointly and severally by all Insureds. The limits of liability set forth in the Declarations are in addition to and in excess of the deductible
.If a claim is based on or arises out of the rendering of eleemosynary (pro bono) legal services, no deductible will apply but only 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.
F. Risk Management Incentives
In the event that a claim is eligible for more than one Risk Management Incentive, the Insured shall receive the benefit of the highest deductible credit. In no way shall this section be construed to afford more than one Risk Management Incentive per claim.
1. Mediation
If mediation of a claim takes place either without institution of arbitration proceeding or service of suit or within sixty (60) days of the institution of such proceedings or service of suit, and such claim is ultimately resolved for an amount acceptable to the Insured and the Company by the process of mediation, the Insuredʼs deductible, applying to the claim, will be reduced by 50%. In no event shall the amount of the deductible waived hereunder exceed $25,000.
2. Engagement Letters
If the Insured utilized an engagement letter in connection with the legal services that are the subject of a claim, and such claim is otherwise covered under the Policy, then the Insuredʼs deductible applying to such claim will be reduced by 50%, provided that the engagement letter:
a. includes, at a minimum, the following information:
i. a specific description of the scope of legal services to be performed by the Insured;
ii. the identity of all clients for whom the Insured agreed to perform such legal services;
iii. the fee arrangement for such legal services; and
iv. a description of the Named Insuredʼs file retention and destruction policy; and
b. was signed by all clients identified in such engagement letter prior to the Insuredʼs commencement of representation of such clients for the legal services described in the engagement letter, but in no event more than thirty (30) days after the commencement of such representation.
In no event shall the amount of the deductible waived hereunder exceed $25,000.
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This blog is an excerpt from the policy. The complete policy along with applicable endorsements could impact the information provided above.
Lee Norcross, MBA, CPCU
Managing Director, CEO
(616) 940-1101 Ext. 7080