The amount of legal malpractice insurance coverage you purchase should be guided by your own philosophies about risk-taking, your financial wherewithal and the types of risk you face in your practice. There is no magic formula to calculate the limit. Two lawyers with virtually the same circumstances can each come up with different, but both reasonable limits. Your risk will probably relate to what is emotionally, economically and physically at stake in your underlying representations. You know your practice, the type of cases that you handle and your clients better than anyone else. The underwriter will set a maximum available for your firm (normally based on firm size), but below that maximum level you should choose the limit for your lawyers professional liability insurance that best balances the cost to your comfort level.

Under normal circumstances, you may only change your attorneys professional liability coverage limits on the annual anniversary date. This obviously adds importance to the decision that you make at the time that you are renewing your legal malpractice insurance policy. Exceptions to this once annually change provision can occur, with underwriter approval, if the request ultimately comes from a potential or current client who requires higher limits as a condition of representation. The underwriter will generally require documentation from the client.

The first consideration for your attorneys professional liability coverage is that you should choose a deductible that you can afford to pay. Raising the deductible will generally lower the premium, although sometimes the savings are not as much as you might expect. Deductibles may be “per claim” (applying in full to each claim); or they may be “aggregate” (applying only once in a policy year, regardless of the number of claims). Aggregate deductibles are not always available, and when they are available the legal malpractice insurance premium with the aggregate deductible is higher than it would have been with a per claim deductible.

Both terms mean the same thing. The prior acts (or retroactive date) date establishes how far back into the past, your lawyer’s professional liability policy will cover your acts or omissions. If your policy does not have a prior acts date that will generally mean that there is no limit to how far in the past your policy will provide coverage. If you have been maintaining proper coverage since you began practicing, you will probably have either no prior acts date limitation or one sufficiently far in the past so as to allow coverage, even if the event happened a long time ago. However, if you do not have attorney’s malpractice insurance coverage now, any new coverage will normally be written with a prior acts date that is the same as the inception date of the new policy.

Yes, an extended reporting period endorsement is informally referred to as tail coverage. Under certain circumstances, this feature can be useful because claims-made lawyers professional liability policies cover only claims that are made and reported during the policy period. This means that regardless of when the act or omission giving rise to the claim occurred, if the claim is not reported during the legal malpractice insurance policy period or a brief specified period (usually 30 or 60 days) after expiration, then that claim is not covered. Therefore most insurers offer optional extended reporting period endorsements for specified periods of time. For example, an attorney might purchase a 24-month ERP or a 36-month ERP. It should be noted that these ERPs do not extend the attorneys professional liability policy period, change the scope of coverage provided or increase the insurer’s limits of liability. ERPs only extend the time available for reporting the claim.

It may be covered, but it will depend upon your prior acts date (aka retroactive date).

In the insurance world, there are two basic contract types: claims-made and occurrence. These are fundamentally different in the way that they trigger coverage for a claim. Occurrence policies (such as your automobile or homeowners policies) provide coverage for damage that occurs during the policy period, regardless of when the damage is discovered, if notice is made within a reasonable time. The other coverage triggering mechanism (and generally the only one available for attorneys professional liability coverage) is claims-made. In contrast to the occurrence form, the claims-made contract provides coverage for claims for which the insurer receives notice during the policy period, regardless of when the damage occurred.

 Yes.

If your policy has CEOL, your lawyers professional liability insurance company will pay the expenses of defending you without reducing your limit of liability. When the time comes for paying the settlement or judgment, your limit will still be fully available. It is important to note that some legal malpractice insurance companies will establish a separate limit that caps the claim expenses that are payable outside of the limit; while others leave the available amount uncapped.

When your insurance company handles a claim for you, it will provide money for the settlement or judgment; and it will also pay for legal and claim related expenses. An important question is whether those legal and claim related expenses must come out of your lawyers professional liability insurance policy limit. If your policy has a provision called “Claim Expenses Inside the Limit" (or CEIL) then the insurance company is paying those legal and claim related expenses outside of your limit, and the amount available to pay the settlement or judgment is reduced by that amount. If your attorneys malpractice insurance policy has a provision called “Claim Expenses Outside the Limit" (or CEOL) then the insurance company is paying those legal and claim related expenses outside of your limit.

If CEOL (claims expenses outside the limits) is not available, you can choose (within the available alternatives) a somewhat higher limit that is adequate to pay the claim related expenses and still be adequate to pay the settlement or judgment.

Calculating the premium involves many factors. The primary factors are the number of attorneys in the firm and how many “years of prior acts” that each will have covered. In addition, the limits of liability and the deductible that you choose will be significant factors. Equally significant factors are your claims history and the firm’s practice areas. Beyond those major points, further modification to the premium will be based upon your level of specialization, insurance history, fee suits, disciplinary proceedings and even your internal controls, such as docket control and conflict checking systems. Your attorneys malpractice insurance premium will be unique to your firm.