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 is a hammer clause in a legal malpractice insurance policy?

It’s a great question that I get asked a lot. Simply put, a hammer clause in a legal malpractice policy is the carrier’s ability to force you to settle a claim that you really don’t want to settle.

How does the carrier do this?

The carrier basically just says, look, we can settle this claim for X number of dollars. You say, well, no, I don’t want to settle it for X number of dollars. And the carrier says, okay, we won’t settle it, we’ll keep fighting it, but if the end result is a settlement larger than what we could have settled it for back here, you’re responsible for the difference. You’re on the hook.

What is step rating and how does it affect my legal malpractice premium?

Simply put, step rating actually causes your premium to increase. Why? Because each step is equivalent to an additional step or an additional year of exposure.

When you’re a new lawyer, or you’re just opening up your firm, you’re down on the lowest level, or the lowest step because you don’t have anything or any ghosts or skeletons in your closet that the carrier is concerned about.

But each year as you practice, you go up each step. And again, the more steps, the more exposure. The more exposure, the more premium the carrier is going to charge.

So simply put, step rating causes your premium to increase.

How do I report claims under my professional liability insurance policy?

This is a great question. You spend a lot of money on a professional liability policy and you want to be sure that when and if you do have a claim to report, that it’s done properly and promptly.

Usually the carrier has three ways for you to report claims. One is by email, two is by fax, and three is by us mail. The contact information for these three methods of reporting claims is usually found in the policy itself or on the declarations page.

Remember, don’t hesitate. Don’t wait. prompt reporting of claims is great. I’m Don I your insurance guy.

What deductible should I choose for my legal malpractice insurance policy?

That answer is really a personal preference. You can go on both ends of the spectrum from a zero deductible, $10,000 deductible or even higher. It really depends on your comfort level.

If you are comfortable having zero deductible and paying a higher premium, because that’s what’s going to happen, then take that.

If you’re not comfortable with paying the higher premium and having a low deductible, take the lower premium and higher deductible. Again, I call it sleep insurance. Whatever you’re comfortable with is what you want to choose.

What is an aggregate deductible on a legal malpractice insurance policy?

An aggregate deductible is nothing more than an annual deductible as opposed to a per claim deductible. That’s it!