Planning for Retirement & Your Malpractice Policy
ERC “Tail” Coverage At No Cost To You
All Lawyer Professional Liability (LPL) policies are on a “Claims Made” format. Extended Reporting Coverage Endorsement, (ERC) also known as “TAIL” coverage is an important consideration if you are planning to retire in the near future. The endorsement will allow the policyholder to report a claim after the expiration of the policy.
Most LPL policies provide the ability of the retiring lawyer to purchase adequate “TAIL” coverage. Many LPL policies even offer Unlimited “TAIL” coverage at no additional premium!
For a solo practice, the ability to obtain “Free” “TAIL” coverage is an important consideration. However, in order to maximize this benefit, some planning is required.
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. 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 to qualify for No Cost Unlimited Tail Coverage. There is also a deadline after the expiration of the policy to request the No Cost Tail coverage.
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 No Cost “TAIL” coverage if the attorney practices law again after obtaining the TAIL coverage endorsement.
For all law firms, but especially for a solo practice, it is important to plan for this benefit. You can save thousands of dollars!
Kaestner & Berry is always available to assist you with this planning. Always let us know if you are contemplating retirement or “ceasing the private practice of law”.