Excess Malpractice Insurance: Do you have sufficient coverage?
One area of insurance coverage that deserves special attention is excess insurance. It provides an additional layer of insurance protection should your defence and indemnity payments exceed the $1 million per claim/$2 million in the aggregate limits provided by the primary LAWPRO insurance program.
Why should you consider buying Excess insurance? Consider these facts:
- One out of every two lawyers who read this article will report a claim or potential claim against them in their career. Of these, one in 100 claims will top the $500,000 mark.
- Think you’re immune to claims because you’re an experienced lawyer? Think again: 67 per cent of lawyers who reported a claim or potential claim had 15 years of experience or more. In other words, of the 11,500 claims reported in the past five years, 7,500 were reported by experienced lawyers. Traditionally, lawyers begin to take on more complex cases with more experience which increases chances of a claim. Lawyers also take on greater workloads and enter into fields they might not have much experience in, such as dabbling in real estate or corporate law. This increases the likelihood of mistakes.
- Further, keep in mind the work of your partners, associates and employed lawyers, which can potentially expose you to a claim. While you might be diligent, your associates might make a mistake. You could be personally liable for any costs over and above the $1 million per claim provided by the primary liability insurance program.
It is important to remember that both expenses and indemnity payments go against these limits. Depending on your circumstances, the $1 million coverage limit of your primary program could be seriously eroded, leaving you potentially liable personally for any claims costs that exceed your coverage limits. To assess your exposure, consider the following:
- What do you know about the law practices of others – tenants, associated law practices, co-counsel, back-up or previous counsel, ‘of counsel’, and others, past and present – for whom you may be held responsible?
- How carefully have you assessed the exposure relating to the areas of law in which you – and those affiliated with you – practise or practised? Matters in the securities, tax, pensions, real estate and estate areas often have higher stakes.
- Have you assessed the exposure that comes from potentially high-stakes transactions?
- What checks and balances are in place for your firm’s trust accounts?
- In today’s environment, it’s not unusual for a single claim to require substantial defence costs. Similarly, pre-judgement interest on a claim that arises out of services provided years earlier can take a major bite out of funds available for an indemnity payment to satisfy a judgement or settlement.
- What other excess insurance may be in place for your benefit?
LAWPRO has created a series of questions that will help you more fully assess your potential exposure to claims – and your need for Excess Insurance coverage. It is available at www.lawpro.ca/insurance/pdf/Excess_Stress_Test.pdf.
LLPs and excess insurance: One of the requirements of a Limited Liability Partnership (LLP) is that the partners advise clients about the limited extent of their liability within the LLP under the Partnerships Act. Lawyers in LLPs will want to be able to reassure clients that the firm – an LLP – carries substantial insurance protection. Excess insurance is one way for you to be able to provide that assurance, and protect yourself against excess exposures – for your own legal services, for services provided by others under your direct supervision or control, for firm exposures predating the LLP arrangements, and for protection of the LLP firm assets.
Law corporations and excess insurance: If you are practising in a Law Corporation, remember to insure for your full exposure, since the traditional protections associated with working in a corporate entity do not exist in a Law Corporation.
What will it cost you and how to get it? With claims costs on the rise ($1 million isn’t nearly as much as it used to be), the time may be right for you to consider purchasing Excess insurance. It only takes one claim to seriously dent your coverage limits, and Excess insurance acts as a backstop should you top out on your mandatory plan.
Applying for Excess insurance is easy: Contact our Customer Service department at (416) 598-5899 or 1-800-410-1013 or email at [email protected] and ask about our Excess insurance policy. They will send you a no obligation quote. If you chose to increase your coverage limits, you need only apply once. Your Excess insurance is automatically renewed each year and no extra paperwork is involved.
Placing your Excess coverage with LAWPRO also simplifies your reporting obligations if you have to report a claim: You report only once – as your primary and Excess insurer are one and the same.
The comfort of knowing you’re covered is priceless. Call LAWPRO today to get your no obligation quote.
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