Mid Term Additions/Deletions:
Each malpractice insurance company has different requirements for the Mid Term Addition of attorneys and/or the Mid Term deletion of attorneys. The general rule is that there is no additional charge when adding an attorney to your firm with date of hire coverage during the mid term of the policy. By the same token there is no refund when an attorney is removed mid term from the policy. The underwriters consider it a “wash”. However, some companies make an exception if the change is made within 30 days after the effective date of the policy. In addition, at least one company charges for each mid term addition and refunds for all departures.
You should contact Kaestner & Berry immediately when there is a mid term change at your firm and we will make sure you obtain the most value for your coverage.
All Lawyer Professional Liability (LPL) policies are on a claims made basis. A claims made format confuses many people.
There are 2 important and frequently confused concepts, to prevent gaps in coverage.
Retroactive Date – A “retroactive date” is a date cited in a claims-made policy or endorsement. When such a date is applicable, the policy or endorsement will not cover injuries or damage if the specified trigger of coverage (the error) occurred before the specified date. Coverage for those injuries or damage is excluded even if the claim is first made during the policy period. In short, a claims-made LPL policy does not cover claims when the act, error, or omission out of which the claim arises occurred before any applicable retroactive date.The retro date for a given coverage is often set to coincide with the effective date of the first policy providing that claims-made coverage, and it typically remains the same as the policy is replaced or renewed with subsequent claims-made policies. However, you may be contacted by an unethical salesperson who offers a lower premium by changing this date without telling you of this change. This would create an unwanted gap in coverage. You want to avoid surprises like this.
Extended Reporting Period (ERP) (Tail Coverage) – Claims made forms and endorsements often specify an ERP that is provided only if the named insured requests it in writing within 30 to 60 days (depending on the carrier) after the end of the policy period and pays the applicable additional premium when due. The ERP is a period after the expiration of coverage during which a claim may be made and still be covered by the policy. Note that while the ERP affords additional time for claims to be made, those claims must result from incidents that have occurred on or after the retroactive date and before the start date of the ERP (Tail) coverage.
As mentioned, the ERP is provided only if the named insured requests it in writing within 30 to 60 days after the end of the policy period and pays the applicable additional premium when due. A 60 day provision is fairly standard in claims-made policies. However, the policy should be consulted because there are some policies that require action in 30 days. It is a one-time option which Kaestner & Berry will assist you with.
Most LPL policies offer Unlimited ERP (tail) coverage upon retirement at no cost. There typically are several conditions to obtain this benefit at no cost. Kaestner & Berry will assist you in your planning to obtain this benefit.
“Bare” Lawyers. A Risk To All In The Profession.
Many attorneys today continue to be “bare” and practice without lawyers’ professional liability (LPL) insurance. Even if you have malpractice insurance you should be aware of the exposure. You do not want to be drawn into a claim against an attorney that you office share with, or you refer a case to because that other attorney does not have insurance.
Despite high claim frequency and the relative affordability of LPL insurance, many lawyers are uninsured. There are no national statistics for the percentage of uninsured private practitioners, but the piecemeal data available suggests that it is significant. For example, a 2001 California state bar survey found that 18% of private practitioners were uninsured, and a 2005 Texas survey found that 36% of private practitioners and 63% of solo practitioners were uninsured. Oregon is the only state that requires its attorneys to have malpractice insurance. (As reported in the AON Attorney Advantage Risk Management Newsletter.)
A 2017 survey of nine leading LPL insurers reported that while new malpractice claims against law firms stabilized in 2016, the number was still above pre-2007 to 2009 recession levels. A malpractice claim, groundless or not, can cost tens of thousands of dollars or more in defense costs, exposing a lawyer or small firm to financial strain. Having adequate LPL coverage reduces the time and money attorneys must expend to defend these claims, which provides peace of mind and allows them to continue with the practice of law for other clients. In addition to traditional malpractice defense and indemnity coverage, many LPL policies available today also provide supplemental coverage for subpoena assistance, disciplinary proceedings and cyber/privacy breach matters.
Although malpractice claims are common in all firms, the risk is increased for attorneys in smaller firms, who are more inclined to handle matters outside their areas of expertise. Thus, LPL insurance is a critical purchase for firms that employ fewer than 20 attorneys and solo practitioners, which account for approximately 75% of the lawyers in private practice. Fortunately, in today’s market, small firms can secure LPL coverage for relatively low premiums. For example, experienced attorneys in Missouri, Kansas and Southern Illinois can generally purchase basic LPL coverage for approximately $2,000 or less annually. Pricing, of course, varies based on your practice, policy limits and claim history.
One malpractice claim can leave your firm at risk for significant defense costs. In addition, a malpractice insurance policy provides indemnity to settle a judgment against an attorney and to provide a recovery to your client who may be financially damaged as a result of your error.
The possibility of a malpractice claim is a fact of life for attorneys. Despite diligence and caution, all attorneys are capable of mistakes that can result in a grievance or a malpractice suit. Malpractice insurance remains a best practice as it provides attorneys with an affordable and effective way to protect their business and clients against an error.
Is Your Firm Considering An “Of Counsel” Relationship?
According to Wikipedia an “Of Counsel” in the legal profession of the United States is the title of an attorney who has a relationship with a law firm or an organization, but is not an associate or a partner. Some firms use titles such as “counsel”, “special counsel”, and “senior counsel” for the same concept. According to the American Bar Association Formal Opinion 90-357, the term “of counsel” is to describe a “close, personal, continuous, and regular relationship” between the firm and counsel lawyer. In large law firms, the title generally denotes a lawyer with the experience of a partner, but who does not carry the same workload or business development responsibility.
The general rule is the “of counsel” lawyer is responsible for his own malpractice, but is not vicariously liable for the “firm’s malpractice”. As a result the “of counsel” needs his or her own insurance policy to cover his or her independent acts. The firm is liable for its malpractice and the firm’s partners are vicariously liable for the malpractice of an “of counsel” lawyer acting within the actual or apparent scope of the firm’s practice and for the firm. As a result the “of counsel” should be added to the firm’s malpractice insurance policy, but only for the acts that the “of counsel” performs for “the firm”.
A firm considering forming an “of counsel” relationship with another lawyer should:
- Use a written “of counsel” agreement which outlines duties, benefits, compensation, use of the office and use of the office letterhead.
- Review your malpractice insurance. Make sure the “of counsel” lawyer is added to the law firm’s malpractice policy to cover acts performed for the firm. The “of counsel” lawyer should be required to maintain his or her own malpractice policy, for the acts performed on behalf of the “of counsel” attorneys own separate practice.
- Monitor the relationship to make sure both the “of counsel” lawyer and the firm are implementing the agreement. To avoid a malpractice “surprise” the review should focus on preventing acts that may indicate that the “of counsel” lawyer is acting within the actual or apparent scope of the firm’s practice beyond what has been agreed to by the parties.
Law firms are under Cyber siege. The headlines focus on the large law firms. However, small and midsize law firms are also susceptible to damages from cyber attacks.
Kaestner & Berry is proud to work with SafeLaw. SafeLaw offers standalone cyber risk protection created for the unique cyber risks of law firms. The SafeLaw policy was designed to fill gaps in Lawyers Professional Liability and protect law firms from first and third party cyber risk losses including:
- Confidentiality and Privacy Breach Liability: This is protection from third parties for the firm’s failure to prevent disclosure of personally identifiable information, information subject to attorney client privilege, data subject to a non-disclosure agreement and other confidential information.
- Regulatory Proceedings, Fines and Penalties Liability: Third-party legal liability protection for regulatory, administrative, or disciplinary proceedings as well as resulting fines and penalties due to a data breach or the firm’s failure to comply with privacy, identity theft, data security or data breach notification laws. Coverage also extends to violations of PCI standards.
- Network Security Liability: Third-party legal liability protection for the firm’s actual or alleged failure to prevent the transmission of hacker attacks, or denial of service attacks.
- Multimedia Liability: Third-party legal liability protection for copyright infringement, trademark infringement, and defamation arising out of the firm’s electronic publishing.
- Data Breach Response Expense: First-party coverage for the firm’s expenses following a data breach including access to a panel of data breach response experts such as I.T forensics, legal advisors, public relations, victim notification, call center support, credit monitoring and identity theft remediation.
- Electronic Data Restoration Expense: First-party coverage for the firm’s expenses to recreate or restore data, software, or firmware that is corrupted or damaged by a hacker attack, virus, denial of service attack, or administrative errors.
- Business Income Loss: First-party coverage for the firm’s loss of income and extra expenses due to computer system disruption caused by a hacker attack, virus, denial of service attack, or administrative errors.
- Cyber Crimes: First-party coverage for theft of the firm’s money, securities or other property due to fraudulent funds transfers or fraudulent use of the firm’s computer system to steal money, securities or other property.
- Cyber Extortion: First-party coverage for the firm’s expenses to mitigate or terminate cyber extortion or ransomware threats.
If you do not have a standalone SafeLaw policy you will find that your business is Not protected for one or more of these risks. Contact Kaestner & Berry for a SafeLaw Cyber quote.