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Lawyers Professional Liability also referred to as Errors and Omissions (E&O) or Legal Malpractice, protects you for losses that result in claims from your clients that have relied on your professional opinion and knowledge.
Key Items to look for in your E&O / Professional policy
| 1. | Consent to settle – do you have the ability to say no to protect your reputation | |
| 2. | Are Defense costs included in the limit or outside the limit. If defense costs are within the limits, but you need to make sure your limits are adequate. | |
| 3. | Does your deductible apply to the defense costs. |
Most professional policies are written on a claims made basis rather than occurrence basis. The difference between claims made and occurrence is that when a claim is made under an occurrence policy the policy that is in force at the time of the occurrence is the one that pays. With claims made it is the policy that is in force at the time the claim is made, not when it occurred that pays. With a claims made policy the claim must occur and be reported after the retro date and before the expiration date of the policy term. The key to a claims made policy is to make sure your ‘retro’ date is always the same date as the first claims made policy under which you were insured. If this is not the case, you could have a gap in coverage, even if you have continuously carried insurance.
Example: Retro date 1-1-03 Policy effective dates 1-1-07 to 1-1-08, Claim occurred 6-5-05, Claim made 4-1-07 – Yes there is coverage.
Example: Retro date 1-1-07 Policy effective dates 1-1-07 to 1-1-08, Claim occurred 6-5-05, Claim made 4-1-07 – No coverage.
Claim occurred before Retro Date.
If you retire from the practice of law or switch from a claims made policy to an occurrence policy (or go to work for a company or a governmental entity), you will need to purchase tail coverage for any claim that might have occurred during the time you were covered under a claims made policy, but which may be asserted after the expiration of the policy.
Please note: J. Michael Low is a former AZ Director of Insurance, and is the founding partner and an attorney with Low & Childers, PC of Phoenix, AZ. He is still practicing full time and has agreed to help Low & Johnson on certain coverage and claims issues relating to insurance. He is not issuing legal opinions or legal advice on behalf of Low & Childers. Mr. Low is a licensed property and casualty producer in the state of Arizona.
Any questions please give me a call or e-mail. Also, we keep the insurance tips newsletter an various topical insurance issued posted on the Low & Johnson web site www.lowjohnson.com.