Planning for Retirement & Your Malpractice Insurance Policy

Since all Lawyer Professional Liability (LPL) policies are on a “Claims Made” format, Extended Reporting Coverage (ERC), also known as “TAIL” coverage, is an important consideration if you are planning to retire or otherwise cease the private practice of law. Most LPL policies provide the ability of the retiring lawyer to purchase adequate “TAIL” coverage. Many LPL policies even offer the “TAIL” coverage at no additional premium, under certain circumstances.

In order to qualify for the “TAIL” coverage at no cost, there are certain restrictions built into the policy. A typical restriction is that the Company will require the insured lawyer to have been insured by the same Company for (3) consecutive years before the attorney qualifies for No Cost Tail. The length of time varies, so it is important that you review your policy or you can contact Kaestner & Berry to determine the length of the waiting period your policy requires you to be insured by the same company in order for you to qualify. In addition, there may be other restrictions in your policy on your ability to qualify for this free benefit. For example, some policies require the attorney to be at least 55 years of age.

The policy also typically requires that the attorney has “retired or otherwise ceased the private practice of law”. Some policies include strong language which voids the “TAIL” coverage if the attorney practices law again after obtaining the TAIL coverage endorsement. However, it is important to keep in mind that if your policy contains the “otherwise cease the private practice of law” language, that you may qualify for No Cost Unlimited TAIL if you move into an industry or government position

For a solo practice, the ability to obtain “TAIL” coverage at no additional premium is an important consideration. However, in order to maximize the benefit, some planning is required.

For all law firms, but especially for a solo practice, it is important to plan for this benefit.

Kaestner & Berry is always available to assist you with this planning.

Cyber Update: The Risk Is Increasing

In part, on account of the virus, cyber risk claims have increased in frequency and severity. Ransomware claims are up over 725% in the last eight months and show no signs of slowing down. Law firms are primary targets for Ransomware/extortion criminal syndicates. In light of deteriorating claims experience, most cyber risk insurers are implementing extensive changes to their cyber risk programs and policies across all industry classes and segments. Prices are expected to increase slightly.  

We are in a unique position because we only service law firm clients, and so our efforts focus solely on law firm risks. This allows us to best serve our clients. Contact Kaestner & Berry if you do not have a cyber policy to protect your firm in the event of cyber claims.

Understanding Tails

On Lawyer Professional Liability policies, it is important to understand “TAIL” coverage. This is because the policies are all on a claims made basis. Under a claims made policy the coverage is triggered at the time the claim is reported to the carrier.

The Importance of Tail Coverage for Retired Professionals

When a lawyer retires, his or her exposure to future claims does not end. Claims may continue to be made against the lawyer and/or against the law firm for which he or she worked before retiring. Failure to arrange so-called tail coverage (also known as an extended reporting period, or ERP) for future claims can leave the retiree and his or her former employer subject to uninsured losses.

Given the long-tail nature of claims against professionals, it is not uncommon for claims to be made many years after the allegedly wrongful act took place. Accordingly, even if a professional ceases to practice, he or she must obtain some form of “tail coverage” to avoid gaps because claims are often made many years after an act was committed.

An ERP in a claims-made policy allows an insured to report a claim or claims to an insurer after a policy has terminated if the claim was the result of an act that took place while the policy was in force on the date when a claim is made against the insured.

“No Cost” Nonpracticing Tail for Retired Lawyers

For solo attorneys in particular, there is a significant incentive to keep track of the provisions in your policy for no cost tail coverage. Most companies offer free tail coverage upon retirement or “ceasing of practice of law”. There are qualifications to this no cost tail coverage. For instance, most companies require that you be insured with that company for at least 3 consecutive years before you qualify. (Some companies require you be insured by them for 5 years). Some companies require the “retiring” insured by at least 55 years of age. Check your policy or contact Kaestner & Berry if you have any questions.

Kaestner & Berry is helping you navigate your law firm’s malpractice insurance.

***ALERT*** Trust Fund Accounts Are Targeted By Fake “Clients” Scam

Scam background – The client contacts the insured attorney seeking representation regarding closing out a settlement or collecting a debt. The client provides the lawyer with contact information for the third party who is “settling” their claim with the client.

The settling party can be an alleged former employer, insurance adjuster, debtor or any other party who might negotiate a settlement. The lawyer contacts that person, arranges the settlement, and then receives a counterfeit check from the third party, which is then deposited into the lawyer’s trust account. The client often calls and/or emails the lawyer urging that the wire transfer be sent as soon as the funds are credited, alleging circumstances regarding an immediate need for the funds. Once the lawyer’s bank makes the funds available in the account, the lawyer then wires the funds to an account set up for the fraud.

The money is removed immediately, the account is closed, and the “client” disappears. After the lawyer’s bank determines that the check is counterfeit, the bank then sweeps the trust account for the funds, which are now gone. If the account had remaining funds that are being held for other clients, the bank will take those funds, thus depleting the account of monies the lawyer owes to others. If the account does not have sufficient funds, the bank then makes a demand on the lawyer for repayment of the amount of the counterfeit check, which is usually a substantial amount of money.

It is a common bank practice for banks to make funds “available” to the customer several days before the bank receives the funds from the payee bank. The risk is that under the UCC, the bank can recoup the funds from the depositor’s account if the check is later determined to be counterfeit or NSF. Lawyer malpractice insurance policies are not designed to protect against crimes committed on the trust account. As a result this will likely not be covered under your malpractice insurance policy.

What To Do To Protect Your Practice:

  • Do not disburse funds until the bank has confirmed that the check has been cleared by the payee bank and finally deposited into your trust account – when the bank shows that the funds are “available”, that does not mean that the check has cleared. Make sure the check has cleared.
  • Avoid wire transfers, except when dealing with well-known existing clients.
  • Advise new clients at the start of the representation that they will not receive any payment until the check has cleared and that this will take time.
  • Keep in mind that there is a difference between funds from a check being “available” and the check having “cleared”!
  • Review your cyber and/or crime policy to see if there is coverage for this type of activity.

Contact Kaestner & Berry with any questions or to get a quote for Cyber or Crime Insurance!

Cyber Coverage – Now More Than Ever!

The change in business operations, during the pandemic, has created new exposures for your business. In order to accommodate staff working from home, businesses are using new software and staff is making greater use of public internet. Those changes have increased the risk of a cyber incident that could adversely impact your business.

Many businesses rely on their network and anti-virus security systems, malware and cyber security training, to protect them from cyber injury. Recent headlines reported that Jeff Bezos, the richest man in the world, and former president Barack Obama, were hacked. I do not know the sophistication of the network security that these two gentlemen employ, but I suspect it is significantly more sophisticated than the average business. My point is that if Jeff Bezos and President Barack Obama can be hacked, no one is safe from a cyber injury.

The cyber criminals are more aggressive and savvy than ever before. A recent report from Verizon noted that 55% of the 2019 breach reports they reviewed were connected to organized crime. The cyber criminals are a step or two ahead of the defenses available to most businesses.

As a result, cyber insurance coverage is more important than ever for businesses. If you can not prevent the loss from happening, it is important to have a quality comprehensive cyber insurance policy to compensate you in the event of a loss. It is also important to have expert cyber liability attorneys and security professionals provided by your carrier to assist you if there is an incident.

Kaestner & Berry offers SafeLaw, a cyber product designed specifically for law firms.

Protect your firm from:

  1. Lost revenues as a result from being shut down due to a cyber incident;
  2. Regulatory fines;
  3. Legal action from clients;
  4. Fraudulent fund transfers; and
  5. Damage to your reputation.

Contact Kaestner & Berry for a no obligation cyber/security breach policy quote to protect your business. Pricing can be as low as $500 for the year!

Readers Rate Kaestner & Berry A Best Provider

Missouri Lawyer’s Weekly recently reported that Kaestner & Berry Professional Insurance Services is a “Best Malpractice Insurance Provider” in the state. This is the fourth year in a row for this honor and highlights the value Kaestner & Berry provides to our clients. This year we were also voted the “Best Surety Bond Provider” by the readers of Missouri Lawyer’s Weekly.

We are halfway through 2020. The changes we have seen so far to our world for this year have been historical! These changes highlight the continued value of Kaestner & Berry to our clients.

As an independent insurance agency, we focus on providing the best possible insurance, at an affordable cost, to the legal community. Kaestner & Berry is uniquely situated to help you navigate the changes impacting your business.

The other companies on the Missouri Lawyer’s Weekly “Best Provider” list typically only have one product to offer you. In effect, they have one arrow in their quiver to offer to their customer. As an independent agent, Kaestner & Berry has over a dozen arrows in our quiver! This flexibility allows us to match the best malpractice coverage, at the best price for our clients. It is this flexibility that is important to you in a time of unprecedented change.

Kaestner & Berry will save you on your insurance costs. Having the ability to shop your account allows you to have access to the best pricing in the marketplace.

Kaestner & Berry will save you time. You can spend countless hours trying to sort through the various policies and coverages offered by the many competing companies in our market. You can complete multiple applications for these different companies. Or, you can place your trust in the fact that Kaestner & Berry specializes in insurance coverage for law firms in Missouri, Kansas and Southern Illinois.

Thank you for the trust you place in Kaestner & Berry.