Lawyers buying malpractice insurance for the first time are surprised when their premium goes up year over year when nothing seems to change. This increase is on account of a standard insurance industry practice known as a Step Rate.
What is a Step-Rate increase?
The first year your firm has a professional liability policy, your coverage only includes the current year of legal work. As a result, the underwriter actually provides a discount. After the first year renewal, your premium will increase as the policy covers an additional year of legal work. The increase is a result of the underwriter gradually reducing the discount.
How long does Step-Rating last?
Step rating typically ends in 5-7 years depending on various factors, including the state in which you are located. You cannot avoid the impact of step rating by switching carriers as almost all carriers use step rating.
What else is making my rates change?
Changes in limits, deductible, areas of practice, number of attorneys, claims, changes in firm procedures as well as a carrier’s change in underwriting guidelines could impact your premium.
“Come gather ‘round people, wherever you roam, and admit that the waters around you have grown, and accept it that soon you’ll be drenched to the bone, if your time to you is worth savin’, and you better start swimmin’, or you’ll sink like a stone, for the times they are a-changin’”
Yes, 2021 is ushering in a number of changes for all of us. If your practice is changing, here is a list of high risk areas of practice that may impact your malpractice insurance coverage.
Cannabis Representation – Nationwide the insurance and financial industries have not been able to reconcile an industry that is illegal at the federal level and legal in many states. As a result, pricing is high, if available, even for lawyers who are just giving advice to these businesses.
Plaintiff Class Action and Mass Tort work and to a lesser extent defense work in this area. Almost universally class action and mass tort are viewed as a high risk. Many underwriters will not write a firm doing this work.
Medical Malpractice Plaintiff Work – Traditionally, a high claim area of practice.
High Volume Estate Work – Claim statistics are showing an increase in severity in this area of the law.
High Value Family Law – Claim statistics are showing an increase in severity.
IP Work – Viewed as extremely high risk. Many underwriters will not provide terms for a firm doing this type of work.
Securities Work – High severity.
We are not suggesting that you not take on these representations for your clients, however, you should be aware that adding these areas of practice to the work performed at your firm will likely have an impact on your malpractice insurance costs.
If there are any questions, please contact your Kaestner & Berry representation for assistance.
At Kaestner & Berry we are independent agents who specialize in helping law firms meet the challenges of a changing world.
Have you considered your risk for an EPLI claim? EPLI claims are on the rise. In 2017, there were 84,000 charges filed with the EEOC. The median judgement for employment law suits that went to trial in that year was $106,800.00. The mean award was $375,162. In 2017, there were 12,000 plus claims. Over $350,000,000 in employment related claims were paid that year.
Since 2017 a lot has happened. There are several different situations in the new post COVID-19 workplace, which can result in a potential EPLI claim.
Employers who lay off employees and/or recall other employees may face discrimination claims.
Employees transitioning back to work in the workplace may give rise to employment claims regarding accommodating disabilities and religious practices.
COVID-19 relief bills provide two new causes of action for failure to provide paid sick and family leave, and retaliation after the use of paid sick and family leave.
Vaccination requirements and incentives can give rise to disability and religious discrimination.
*Info from The Professional Liability Underwriter Society – “COVID-19 EPLI Update”
Kaestner & Berry is proud to introduce a “starter” EPLI policy from Safe Talent. The company has an A+ AM Best rating. It is designed for small to medium size law firms.
In most cases, the application consists of just 3 questions. The policy limits are $250,000. The deductible is $10,000. Pricing is based on the number of employees at the firm.
Number of Employees
Approximate Total Cost
1 to 5
6 to 10
11 to 20
21 to 30
Contact your Kaestner & Berry representative for details.
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.
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.
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.