What Is A Step Rating?

The most common question I get as an insurance broker from new lawyers or new law firms is why did my premium on my professional liability insurance increase especially when we haven’t had any change at all in our areas of practice? And probably more important, we haven’t had any claims, but yet my premium goes up by 20%? What’s the deal? How did that happen? 

Well, the simple answer to that question is, step rating.  Step rating is really nothing more than the carrier’s attempt to price your increased exposure as you practice year to year. 

As an example, the very first year that you, the lawyer, purchase a professional liability policy is probably going to be the least amount that you ever pay for professional liability insurance. The reason for that? You have no baggage, the carrier is basically covering you from the effective date of your policy, day one, going forward, there’s nothing in your past that actually is going to impact the premium, or gives the carrier concern that there might be a claim out there waiting to happen. 

Your first renewal, the carrier not only is going to price it for everything that you’ve done in the past, you know, which is one year, however, they also have to price it for what you’re going to do for the next 12 months. Therefore, their exposure basically doubles. Therefore, they have to increase your premium to capture that risk. 

The same holds true for the third year, not only is the carrier going to insure you for everything that you’re going to do for the third year, but they’re also insuring you for everything that you did in year two and year one. Basically, their exposure is tripling – they have to capture that risk by again, increasing your premium. 

The good news behind step rating is that there is a cap to it. It’s not going to increase your premium for the next 30, 40 years. Depending on the carrier, step rating could cap at five years, could cap at six years, could cap at seven years. Again, it depends on the carrier that you’re insured with. But again, the good news is that it does cap, it doesn’t continue on and on and on. 

What Is A Hammer Clause?

What is a hammer clause

If you have a legal malpractice policy or have been looking for one, I’m sure you have heard the term “Hammer Clause:”.  It has been and is a widely discussed term. Well what is a hammer clause anyway? Great question!

Simply put, the hammer clause which is located in the consent to settle provision of the policy is the carrier’s ability or attempt to force you to settle a reported claim.  In its strictest form, you, the insured, must accept the negotiated settlement of the carrier.  You have no input. 

Over the years, the consent to settle provision and hammer clause have been revised and modified. Today, some carriers state that they will not settle any claim without the consent of the insured, who’s consent shall not be unreasonably withheld.  What’s unreasonable right?  It is not defined in the policy.  

Other carriers state that you, the insured, can refuse to settle a claim agreed to by both the claimant and the carrier.  However if that claim continues and settles for a higher amount than what was originally agreed to by the carrier and the claimant, you are responsible for the difference! Yiokes, that could be expensive.  

Still there are other types of modified versions of the “clauses.”  These versions allow you to reject a settlement the carrier and claimant agree to. and if that claim settles/closes for a higher amount than the original settlement agreed to, the carrier will agree to pay a certain percentage of the increased settlement.  You will be responsible for the rest.  This is kind of a middle of the road hammer clause.

The best type of consent to settle provision for you, the insured, is to have no hammer clause.  Some, not many carriers do offer this.  They give the insured the absolute right to refuse to settle with no consequence or hammer!

How do you know what you have in your policy?  Best way to find out is to read the policy and discuss it with your broker.

Disciplinary Actions Against You

Today, a lawyers malpractice insurance policy is usually written with several different types of ancillary coverages included in the policy.  These are benefits that are in addition to the coverage for the actual or alleged act of malpractice.  

One of these benefits found in most policies is coverage for disciplinary proceedings.  Based upon what I have seen, the disciplinary coverage is one of the most beneficial coverages in the ancillary category.  Most policies that offer this type of coverage will have a sublimit available to the insured.  This sublimit of coverage can range anywhere from $10k to $250K, some will offer this in the form of a per proceeding limit with a policy maximum while others will offer the limit as a policy aggregate.  

Also, some carriers will specify that the deductible will apply while others will specify that the deductible does not apply.  A nice feature.  Accessing this type of coverage is similar to reporting a claim, you must report to the carrier as soon as you are aware of the disciplinary action against you.  Late reporting can cause declination of coverage.

Having to appear or to report to the disciplinary board can be nerve racking experience.  If this happens to you make sure you retain counsel to assist you and notify your insurance carrier to report the issue.  Don’t represent yourself, obtain counsel and use your policy coverage to assist with the costs.

Do’s And Don’ts of Buying Legal Malpractice Insurance

When purchasing something, Everyone wants a good deal right?  Same is true for your legal malpractice insurance.  You want the coverage that you need but you don’t want to overpay.  

I’ve been helping lawyers for more than 30 years purchase legal malpractice insurance and I have seen the good and the bad when insureds shop for their legal malpractice insurace.  

Here are a few do’s and don’ts when shopping your legal malpractice insurance:

Do use a broker that can shop more than one legal malpractice carrier.  Let one broker obtain multiple quotes.  Involving more than one broker can be confusing not only for you but for insurance carriers if they receive multiple submissions for the same risk.

Don’t change carriers every year.  Lawyers malpractice policies are written on a claims made basis and switching carriers every year can be an issue when it comes to claims reporting.

Do take into consideration your personal circumstances before changing carriers: are you retiring soon?  Most carrier require that you be insured with them for 3 consecutive years to qualify for a free retirement tail.  Retirement tails can be expensive!

Don’t base your decision strictly on price.  You have heard it before I know, but it is true.  There is more to it than just the pricing.

Do read the policy before changing carriers.  Make sure you are getting what you asked for.  Things like prior acts coverage, career coverage, exclusions are often overlooked

Don’t shotgun your application to several carriers or brokers that you know or may have heard of.  There are many carriers that don’t have an interest in writing your coverage, so why take the time and apply.  Your broker should know what carriers are interested in writing a policy that covers your specific exposures.

Switching legal malpractice carriers is no small matter.  Remember it protects your reputation and protects your clients too.  If you’re contemplating making a change, do it right.  

Have You Taken The Steps To Purchase A Stand Alone Cyber Policy?

cyber insurance

Over the last couple of years, I’ve been telling clients and prospective clients alike that now is the time to buy a stand alone cyber policy.  If you haven’t taken the steps to purchase a policy, there couldn’t be a better time than right now.  

Claims are increasing: Ransomware, malware, phishing schemes and fraudulent funds transfer just to name a few of the claims issues that seem to be an everyday occurrence.  Because of the increasing claims, obtaining a standalone cyber policy is getting a little more difficult.  

Carriers are beginning to get a little more selective on who and what industry they want to insure. Policy terms and conditions are beginning to get a little stricter and some carriers are even beginning to exit the marketplace and not offer coverage at all.  

Just a few months ago, one of the larger carriers that write cyber insurance did exit the market and no longer writes the coverage.  Worse yet, one of the ugly consequences of all this, is that the pricing on cyber coverage has started to increase and let’s not forget that ugly word inflation that also is playing a part!

If you haven’t purchased a cyber insurance policy yet, do it now or at least apply for coverage so you can review the offer and make an informed decision.  Keep delaying the process or decision and you may find yourself unable to secure coverage at all and the market has made the decision for you. 

Have any questions about the topic discussed in this article? Contact us today! 412-563-2106.

Will Working Less Hours Affect My Legal Malpractice Premium?

I get asked by most lawyers who are cutting back on their practice hours if and how that will affect their legal malpractice insurance premiums.  

Most are surprised when I tell them that it really won’t have much of an impact on pricing this renewal.  Or for the next couple of renewals for that matter.  

Insureds need to keep in mind that your future workload/hours plays only a part in the pricing and underwriting process of your renewal.  

Another much larger part in the underwriting/pricing process is your prior acts coverage/hours.  For example if you have been insured for 10+ years, working 50 hours per week, and this renewal you decide you’re cutting back to 30 hrs per week to spend more time at home.  Granted you will be creating less exposure for the carrier by working 20 hrs per week less but the 50+ hours per week you worked for the last 10+ years doesn’t go away and that exposure to claims still exists.  

Carriers do and will price for that.  Overtime, the reduced hours you work will have an impact on pricing but not in the near future.  

It is always nice to be in a position to work less hours per week, but don’t expect it to have an immediate impact on your malpractice pricing.  Overtime, yes but not immediate.

What To Do If You Get Non Renewed by Your Insurance Carrier

What To Do If You Get Non Renewed by Your Insurance Carrier

Did you ever receive a certified letter advising you that your malpractice insurance has just been non renewed?  I know that it is not a pleasant feeling, but what should you do?

First thing is don’t panic.  You’re not alone.  It happens probably more than you realize.  Especially in today’s market.

Second, Call your broker if he or she has not already called you.  Find out the specific reason why you received the non renewal.  Confirm the non renewal is valid.  There are many situations where the non renewal occurs: Sometimes it is simply that the current carrier is no longer writing business in this state, sometimes it has to do with your claims history, sometimes it has to do with a certain area of practice you perform or some other type of valid reason.  

Third, work with your broker.  Create a plan to approach the marketplace, select carriers with your broker to approach that will offer the best options at obtaining renewal terms, order loss runs and update the firm information to provide a clear and updated picture of your firm.

Lastly, do not “shotgun” your application to all carriers that you hear of or know.  This could result in confusion in the marketplace, resulting in several declinations from carriers and creating unnecessary delays in securing terms.  If you’re with the right broker, he/she should know what carriers to approach that provides you the best opportunity to secure renewal terms.  

Navigating through a non renewal can be confusing but following the steps I outlined will make it a little easier.

Are You Retiring Soon As An Attorney?

Are you planning on retirement in the next few years?  If so, good for you.  I’m sure you’re looking forward to it!  However, there are many things you need to complete prior to you closing or selling your office.  I want to discuss this issue from an insurance standpoint only.  

When you retire or close your office, the exposure from your cases stays with you.  Unfortunately that exposure doesn’t retire when you do.  You need to be certain that when you do walk out that door for good that your malpractice insurance remains in place so that you are covered for future claims that may be filed against you from past cases or acts.  

Before you retire or sell your practice, you should contact your broker and make sure that you have the right under the policy to purchase tail coverage or what is called an extended reporting provision.  Exercising this right under the policy allows you to report to the carrier any claims that may arise against you after retirement provided the alleged error occurred during the time you were insured or after any retro date that was listed on your policy.  

This tail provision usually comes with several options with regards to the length of the tail or how long the tail will last.  Depending on the policy, time frames can range from 1 year to an unlimited time frame.  The longer the time period of the tail coverage the more expensive the cost.  It is important to keep in mind that the time in which to exercise or purchase these extending reporting provisions are short.  

Usually in Pennsylvania, you have 60 days from the expiration date of your current policy or from the date you retire and or sell your practice. You cannot purchase the extended reporting provision after the time frame expires.  Basically it is a one shot deal.  

Lastly, most policies now contain a “retirement provision” where if you satisfy certain policy requirements, the tail coverage can be free of charge.  Otherwise there is usually a charge associated with it.  This should be discussed with your insurance guy before you retire.

Whether free of charge or not, tail coverage when you retire and or sell your practice is a vital step in that process. Do not walk away from your practice without first making sure you are covered for your past professional acts.  Having tail coverage will help to ensure a happy retirement.  

Have any questions about legal malpractice insurance? Contact INF today at 412-563-2106.

What To Expect When Applying For Life Insurance

Most people think obtaining life insurance is a long and arduous process. It isn’t! At INF, we really try to make the process as simple and easy as possible. 

We start by completing an indication sheet. You’ll sit down or talk on the phone with either myself, Don Ivol, or Mark Schnelzer and we’ll ask you a few simple questions such as your name, your address, height, weight and gender. We’ll also ask just a couple of questions with regards to your health history. 

At that point, we use the information that you provided and we send it to our managing general agent who has access to 20-25 different insurance carriers. These carriers will look at the information that you provided and come back with a preliminary pricing report. Then, we’ll get back in touch with you and review the available amounts and pricing. 

From there, you can make your decision based upon the amounts, the carrier, and the pricing. At that point, things become a little bit more detailed and there will be a life insurance application that’s required. 

We will always be at your side to walk you through the process, help you answer those questions and get the information to the carrier to verify the original pricing and the coverage terms. So don’t put off applying for life insurance because you think the process is too difficult.

What Is The Purpose Of Life Insurance And How Much Do I Need?

Although it can be quite a depressing subject to discuss, life insurance is something that everyone needs to consider. Life insurance is a necessary tool when it comes to financial planning.

Life insurance can be used for a variety of purposes, including paying for funeral expenses, paying off a mortgage, paying for a child’s college tuition, and providing a significant sum of money to your surviving spouse to help pay for everyday expenses for years to come.

There is no better time to consider it than now, especially since it is the start of a new year. We commonly make New Year’s resolutions to eat healthier, lose weight, exercise more, read more, improve our relationships, and a variety of other things.

Make reviewing your life insurance portfolio, if you have one, one of your New Year’s resolutions.

Is the amount sufficient, or do you need more? Have you bought a new house, sold a house, have a child, or become empty nesters in the last year? All of these factors will have an impact on your need for life insurance and the amount you need. If you don’t have a life insurance portfolio, you should ask yourself the same questions and make adjustments accordingly.