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.