Understanding how your “claims-made and reported coverage” works under your WILMIC professional liability policy.
Lawyers tend to be mobile, often working in several different capacities after they graduate from law school. It is not uncommon for a lawyer to start out working in private practice, then work in-house for a company, move into the fields of academia or government, only to finish their career back in private practice. The fact that there are so many different ways to utilize a law degree is one of the reasons that people decide to go to law school in the first place.
Although changing careers can add excitement to one’s work life and bring about new challenges, it can also create potential coverage gaps that can inadvertently expose a lawyer to an uncovered legal malpractice claim. One concept that can be overlooked is that an attorney is always responsible for his or her own ethical and malpractice violations. That potential liability exposure does not change because the lawyer may have been working for a firm, or as an associate at the time the mistake was made. It is also important to understand that legal professional liability (LPL) policies are written on a claims-made and reported basis, not occurrence policies. To have coverage, the lawyer must have an insurance policy in place when the attorney first learns of any act, error, omission or circumstance that could give rise to any grievance, potential claim or claim and gives notice to the carrier. The legal profession is challenging in this regard because it may take years for an attorney’s error to be discovered. The critical issue for LPL coverage is the date that a reasonably prudent lawyer knew or should have known there could be a claim and the date written notice of the claim matter is provided to the carrier.
Most LPL policies are written as one-year policies. When that policy expires, no claims can be made under that policy, unless the attorney or firm has purchased an extended reporting period endorsement (“tail”). When a lawyer is considering changing firms, or leaving private practice, it is vital that they review all client files they have worked on and that they report any claim, potential claim or grievance matter they are aware of to ensure that they will have coverage if that matter develops down the road. Firms should also keep this potential exposure in mind when making hiring or firing decisions to protect reporting requirements under their policy. As my predecessor Sally Anderson always said, “report anything that you would like coverage for,” when she was asked about what type of legal malpractice claim matters need to be reported.
If a lawyer is re-entering private practice, they can request prior acts coverage that can work to cover the gap dating back to the time the attorney previously practiced. This can eliminate a potential gap in coverage, but only for claim matters that are newly discovered and that the lawyer was not made aware of prior to the effective date of the new policy.
The point of this digest is to remind attorneys to report any claim or potential claim concerns “early and often,” during the policy period, to avoid a potential coverage problem long after the lawyer has changed firms or careers. Another advantage of early reporting is that WILMIC has had success helping lawyers repair a potential claim issue that is reported early. Almost 70% of the potential claims or grievances reported to WILMIC never develop into a claim. In those situations, the attorney generally feels relief after discussing the situation with one of our legal malpractice insurance professionals and is provided guidance to try and help make sure that a claim never arises. Furthermore, by reporting the claim concern, the lawyer is covered and has fulfilled their reporting obligations under their WILMIC LPL policy.
WILMIC is happy to provide our policyholders with risk management advice, CLE programs and the ability to discuss claims or coverage concerns directly with our experienced, in-house claims and underwriting staff. Navigating legal malpractice claims or coverage issues can be complicated and we always welcome the opportunity to speak with our policyholders directly to discuss any claim or coverage questions or concerns. We often receive phone calls from attorneys that we insure to discuss a situation they need help navigating through or just want to get a second opinion on.
Call our trained staff anytime with any concern, as they are always there for you.
Brian Anderson is WILMIC’s Senior Claims Attorney, and works with lawyers in resolving malpractice claims made against policyholders. He enjoys the challenge of helping place policyholders at ease during a time of stress, when they are facing a legal malpractice claim or grievance. He can be contacted via e-mail or by calling (800) 373-3839 ext. 236.