How to Complete Your Professional Liability Application... the Right Way

As underwriters for professional liability insurance, we see hundreds of applications every month.  Some of them are beautifully typed works of art, chock-full of useful quality information and others... well let's just say that they leave something to be desired.  Often we receive applications that are incomplete, unsigned, or have pages missing.

We often wonder why some professionals don't take more time to complete their applications properly.  Your application for professional liability insurance is a representation of you and a snapshot of how you manage your practice.  If this is the only document an underwriter is going to see and can impact how much you will pay for your professional liability insurance, why not take the time to complete it in a detailed and organized fashion as you would a document for a client or the court?

You spend hours working on behalf of your clients trying to produce the best possible representation of them in a legal matter.  You put on your best suit and clean off your desk to present yourself well to your clients, so why wouldn't you do the same when presenting yourself to an insurance company?  We know that, especially with lawyers, time is money.  Sure, you're not getting paid to complete an application for insurance, you can't bill yourself, but if you don't put the proper amount of time and effort into completing your application, you could overpay, possibly be declined coverage or not receive the proper coverages your practice needs.

Next time you are completing an application for your professional liability coverage, think about that underwriter who only gets to know you and your law firm from a piece of paper, and think about how they are going to perceive you.  The easier you make it on them, the better and quicker terms you will likely receive.  Also, the less time you are going to have to spend on the back-and-forth that often occurs with incomplete, illegible applications is more time you can spend working for your clients.  Make it easy for the underwriters and insurance companies, and in turn, they will most likely make it easier on you and your bottom line.

Watch out for that hammer!

Have you read through your professional liability insurance policy?  Probably not. After all who likes to read insurance policies? Often times we find that firms just want coverage in place regardless of what that coverage really is.  If it's cheap and 'good enough' they often take the policy.  While that may be temporarily good for their bottom-line, in the long run they are really just hurting themselves.  Unfortunately, you never know how good your insurance is until you need to use it.

Don't let yourself be surprised about your policy when you find that it doesn't cover you for XYZ.  All professional liability policies are similar, but they all are different too.  Each insurance company drafts their insurance policy with a few unique bells & whistles. You need to read your policy to know what it is you are buying.

One policy feature that I want to touch on today is the 'Hammer Clause'.  This is a provision included by insurers in some consent-to-settlement clauses to encourage the insured to accept a recommended settlement offer.  It provides that if the insured refuses a settlement offer recommend by the insurer, the insurer's liability is limited to the amount of the recommended settlement offer.

Example: The insurer recommends a settlement offer of $100,000.  The insured refuses the offer, and the claim results in a judgement of $200,000 against the insured.  The insurer will only pay $100,000, less any deductible. The insured is now responsible for $100,000, plus any deductible amount.

This may not seem fair to some firms.  Your name and reputation are on the line if a malpractice suit is brought against your firm.  If you know you are right, and just accept the offer because you don't want to be on the hook for the remaining settlement money, you are then admitting liability.  Look for insurance policies that remove the 'Hammer Clause', and modify the consent to settle provision so that it is in your firm's best interest.

There are many other intricacies of professional liability insurance policies, but that's for another post.  Have questions about your coverage or want alternate quotes?  Contact us toll free 800-727-0001 or www.ParagonUnderwriters.com.

Attorneys Increasingly the Targets of Lawsuits, Beefing Up Professional Liability Coverage

source WSJ

Law firms are inceasingly finding themselves on the wrong end of lawsuits and are obtaining insurance against expensive liability claims as they increasingly find themselves on the wrong end of lawsuits.  

Getting blamed for poor results is nothing new for law firms, but they say clients have become more willing to sue in recent years. Claims of employment discrimination and firm mismanagement also are popping up more often as postrecession, law firms cull their ranks and sideline some partners in an attempt to boost profits for those who remain.

Some clients are even using the threat of litigation as a way to negotiate their bills. Martin S. Checov, general counsel with O'Melveny & Myers LLP, says there has been "a disheartening increase" in such tactics since the economy tanked in 2008. There is "a lot more friction out there" with clients, he says. Mr. Checov declines to discuss clients with whom his firm has tussled.

Beefing Up Coverage

Professional-liability insurance typically has been among the top operating costs for law firms, after compensation and real estate. Most firms, particularly those with 50 or more lawyers, buy malpractice insurance, says Anne Marie Davine, who leads the U.S. law-firm practice at insurance broker Marsh. The biggest firms are taking out multimillion-dollar policies, and midsize partnerships that may have been underinsured are increasing their coverage, insurance brokers say.

Claims aren't tracked across the industry but several insurers say they have seen increases in the last year. A poll of six leading insurers last year found that four of them reported increases of 6% to 20% in malpractice claims, according to Ames & Gough Insurance and Risk Management, a specialty-insurance brokerage.

"Insurers are telling us that not only is frequency up, but so is claim severity. It's just costing more to defend and litigate a claim," Ms. Davine says.

A malpractice claim filed last June by J-M Manufacturing Co. against McDermott Will & Emery LLP is one case that the legal industry is watching.

The plastic-pipe manufacturer claims, among other things, that an outside vendor the law firm hired to review documents in a whistleblower lawsuit released nearly 4,000 privileged or irrelevant documents to the U.S. attorney's office in Los Angeles. The government then released those files to the whistleblower plaintiffs, who refused to give them back, J-M says.

The company is seeking unspecified damages and is expected to file a second amended complaint this month.
McDermott Will declines to comment.

In another case, Cold Spring Harbor Laboratory is seeking up to $82.5 million in damages from Ropes & Gray LLP stemming from how a former attorney at the firm handled cancer-research patent applications for synthetic genetic material.

The lab alleges that the lawyer copied text for Cold Spring Harbor's application from a prior patent application by another researcher, leading the U.S. Patent and Trademark Office to say Cold Spring Harbor's application wasn't unique. The lab says it paid hundreds of thousands of dollars in unnecessary legal fees as a result and "has lost millions of dollars in potential licensing fees."

A defense response to the lab's latest amended complaint is due later this week.

Ropes & Gray declines to comment.

The vulnerability of law firms to client litigation is climbing as the value of the underlying deals, patents and other work for clients rise, insurance brokers say.

'Deep Pockets'

And because big law firms carry more insurance than smaller firms, the big practices are particularly attractive targets for litigation. "Plaintiffs' lawyers are conscious of who has the deep pockets," says David Greenberg, a former general counsel for LeClairRyan, a national firm with more than 350 lawyers. Mr. Greenberg now consults on insurance and risk management for law-firm managers.

Insurance brokers say many law firms have expanded their coverage to guard against claims from former employees or disgruntled partners and are looking to shield firm leaders from suits over management decisions, such as whether to merge with other practices.

One case that could set the tone in future employment disputes is a lawsuit filed in 2010 against Kelley Drye & Warren LLP by the Equal Employment Opportunity Commission, alleging age discrimination against lawyer Eugene D'Ablemont and others.

The lawsuit arose from a policy that required partners to relinquish their equity stakes after turning 70. After Mr. D'Ablemont filed an age-discrimination claim over the policy, his compensation was cut to "significantly less" than that paid to younger attorneys with similar client collections, billings and productivity, according to the EEOC complaint.

The complaint seeks lost wages and compensation for pain and suffering. Kelley Drye ditched the policy in 2010, after the suit was filed.
Both sides decline to comment. A recent court filing indicates that they are in settlement negotiations.

The recession and sluggish recovery also have spurred litigation against firms as their clients file for bankruptcy. Trustees seeking to repay creditors often go after the failed businesses' former advisers: lawyers and accountants.

"It's part of my everyday work, where I'm dealing with a bankruptcy trustee or a receiver trying to recover assets any way they can," says Tom McGarry, a partner at Hinshaw & Culbertson LLP, who defends law firms against malpractice claims. "It's a new ballgame and all the loyalties are gone."

Just Starting Out

This is it.  My first line of my first post on my first blog.  I hope I don't screw it up!  Starting something new can be difficult.  It can be scary, exciting, frustrating, and rewarding.  Much like this blog, if you find yourself starting something new you will probably feel these same emotions.

In my line of work I deal with lawyers and law firms.  I help them secure the insurance coverage's that they need to protect their firm's and their livelihoods.

If you are starting a new firm, as is the case quite often these days, you will now be the attorney in charge of securing the insurance for your practice.  If you were formerly at a larger firm this is something that was probably taken care of by the partners, or the office manager. You never needed to worry about being covered, you just always assumed you were.  Now that you're on your own, things are different.  Your livelihood is in your hands!  You're now a business owner and one of the biggest priorities of any business owner is securing insurance to protect the investment that you have made in your self and your practice.

When starting a new practice first and foremost make sure to obtain professional liability insurance to protect yourself and your firm from any potential malpractice claims.  Talk to an informed agent that knows about this type of coverage, to determine the right limits and coverage options that are right for your firm.

You will also need to obtain a Business Owners Policy (BOP) to protect the property and liability of your work space.  Depending on the size of your practice you may need a workers compensation policy, an employment practices liability insurance policy,or health insurance policies to protect yourself and your staff.

Starting out a new firm can be very daunting, but it can be very rewarding too.  Just like this blog entry, I guess all you need to do is get started!