Attorney errors and omissions insurance is complicated. It requires expertise and experience.
Lawyer’s Professional Liability (LPL) Insurance, also known as Errors and Omissions(E&O) Insurance, is possibly the most critical insurance protection for law firms.
This type of insurance provides coverage for claims that arise from “wrongful acts” committed in the rendering of legal services in the lawyer’s capacity. These policies generally offer both indemnification coverage and claim expense coverage.
What’s The E&O Insurance Marketplace Like In 2023?
The increasing expense of litigation and mounting losses created a hard market for attorney errors and omissions insurance.
Personal Injury Attorneys in Ormond Beach, FL – Vukelja & dePaula – claim insurance premiums continue to rise for law firms. The first signs of changes in the marketplace came back in 2018 when the cost of professional liability started to show an average of 5% increase from the prior year.
Today, a consistent increase in awareness about the importance of liability insurance is causing a 5.9% yearly growth in this market and its costs.
Some of the most common claims against legal representation include:
- Administrative Errors: misplacement of documents, lack of communication between parties, missed deadlines, and even failure to follow court rules.
- Allegations of Abandoning Representation: claims from clients against their lawyers for failing to fulfill their obligations to each other (could be the failure to meet deadlines, failure to appear at scheduled court meetings, etc)
- Failure to address the client’s Needs: lawyers not being able to fully take into account the unique situation their clients are in.
The family law attorney, David C. Hardaway points out that as client expectations are increasing and malpractice lawsuits are on the rise, law firms are more exposed than ever before.
In the case of a malpractice lawsuit, your firm’s financial security may depend on your insurance protection.
But there are many ways to prepare against E&O-related conflicts or it’s insurance’s high prices.
Here are 4 factors, terms, and tips you should take into account when thinking about dealing with E&O in the future:
1- Occurrence vs. Claims-Made
Most commercial business insurance policies are written on an “occurrence” basis, while almost all professional liability policies are on a “claims-made” basis.
So, what’s the difference, and why does it matter?
Claims made policies cover incidents reported during the policy period that arise from acts or omissions occurring on or after what is commonly called a “retroactive” or “prior acts” date.
The trigger for coverage under your claims-made policy is not the event’s happening, but the reporting of the claim or incident arising from that event. The event must have occurred on or after your prior acts date, and the claim or incident must be reported during a policy period.
An occurrence policy provides coverage for alleged incidents (injuries) that happened during the policy year regardless of when the claim is reported to the carrier.
The occurrence policy provides a separate coverage limit for each year the policy is in force. The policy does not need to be active to report a claim.
It only matters that the policy was active when the alleged incident occurred.
Speaking with an experienced insurance broker will ensure you get the right coverage for your needs.
2- Key Underwriting Factors
When an insurance company inspects an application, according to a motorcycle accident lawyer natick ma (who also has experience with this affair), numerous factors contribute to its pricing model.
For LPL insurers, underwriters take into consideration a combination of these elements:
- Number of Attorneys – The more attorneys, the more significant potential for a professional liability claim.
- Annual Revenue – Increase in revenue increases the possibility of a claim arising.
- Areas of Practice – Carriers are inclined to offer coverage based on the type of law practice. Certain areas of law are more prone to LPL claims, whereas others are not.
- Mergers and Acquisitions – In recent years, many law firms have merged, causing an increased risk for claims arising from conflicts of interest.
- Jurisdiction – Certain states are more likely to see litigation, higher decisions, and additional expenses.
3- Contract Reviews
Insureds should be proactive in reviewing their E&O exposure and existing coverage as they determine the best strategy to address growing cyber vulnerabilities.
When a customer contract requires insurance, all types of insurance (E&O, General Liability, Worker’s Comp, Umbrella, Cyber, etc.) should be specified.
Companies should review the “limitation of liability and indemnification” clauses in their customer contracts, as underwriters are scrutinizing these provisions (especially as they relate to cyber risk).
Companies should review customer-use policies and guarantees regarding any estimated or guaranteed service availability.
4- Be Proactive With Your Insurance
Don’t leave your insurance entirely up to the broker.
As your renewal date approaches, take these steps to help reduce your costs:
- Begin the renewal process 90 days before the renewal
- Review any open claims. Provide updates with details.
- Be ready to offer details as to COVID-19 impact (if any)
- Discuss marketplace and renewal approached with your broker
- Analyze deductible options to offset the increase in premium
- And… Don’t wait until the last minute!
This Is What You Should Take Aways From This Blog
Law firms are always open to possible damage coming from E&O claims, that’ why Attorney Errors and Omissions Insurance is important.
Whether you’re a small or mid-sized firm, the lawyers are not immune to disgruntled clients. Hire a Fort Lauderdale FL real estate attorney as soon as you can to help you sort out your problems.
Despite the current climate for law firms, insureds can still keep insurance expenses in line without jeopardizing protection for the business.
If you have any questions, please contact me here.
Opinions expressed in this article are solely the author’s opinion. Not intended to provide the reader with legal or any other professional advice. Should you need help or opinion, consult with a qualified professional to address your specific needs.