Navigating Your Professional Liability Policy: Reporting a Claim & Your Rights Under the Policy
Attorneys purchase a Lawyers Professional Liability Insurance policy because they want to protect their law practice, invest in an enjoyable retirement, or meet state or client requirements. Whatever your reason is, it's important to understand the rights you have under your policy and how not exercising your rights can be detrimental to your insurability.
Understanding insurance is something we at DHIA value and encourage. Understanding legal rights is what lawyers value. Recognizing your Lawyers Liability Insurance policy is a contract is key to identifying the rights you have under the policy and how to safeguard those rights. Make informed decisions when it matters most by knowing how to handle a malpractice claim, when to report it to your carrier and how prompt reporting impacts both your practice and the insurance carrier.
Malpractice Claims - To Report, or Not Report
Your Lawyers Professional Liability Insurance policy is there to protect your law practice and your reputation in the event of a malpractice claim. After all, it is what you pay your premium for.
Some policies require insureds to "immediately" report upon knowledge of a claim or potential claim. Some policies provide an extension of time to report, but that does not under any circumstance suggest you wait. Many carriers require written notice. It's important to know what your attorney malpractice policy requires of you in the event of a claim.
Yes, a claim can cause the insurance carrier to increase your rate at renewal, however this usually not the case unless there is a substantial pay-out on the claim. Not reporting a claim or failure to report in a timely manner can cause you to jeopardize coverage for the claim and sometimes, can cause the carrier to non-renew your policy. If your admitted carrier chooses not to renew your policy due to a claim bring withheld, you may find yourself renewing with a non-admitted carrier and paying a significantly higher premium. Be sure to weigh those two outcomes thoroughly prior to withholding a claim from your insurance carrier.
You Have the Right to Decline Coverage
It is important to know that you have the right to decline coverage. When you report a claim to your carrier, you have the option to decline utilizing their services. Although their services are what you pay for, sometimes an insured will decide it's in their best interest to decline coverage for the claim and handle it themselves.
Reporting matters protects the insurance you pay for. It provides you with the opportunity to discuss the matter with a claims professional to see what your options are moving forward. Whether you decide to accept or decline coverage, you took the proper steps in safeguarding your rights under the policy.
Why Should I Report a Potential Claim?
Potential claims should be reported too, and without delay. It may seem silly since an actual claim wasn't made, or because it's too soon to know if it will turn into one.
This uncertainty has many insureds holding on to potential claims with the hopes it will be nothing and they won't have to report it. However, this can do more harm than good. If there is a potential claim, reporting it can help both you and the carrier be proactive. Should it evolve into an actual claim or suit, you and your carrier will already be prepared to respond and act immediately. This enterprising and uniform front has the power to extinguish the flames of a sparking claim.
What constitutes a potential claim may differ from carrier to carrier. Reviewing and understanding the agreements and conditions of your policy is important to protect what you're paying for. Many policy forms have a specific Conditions Section for Notice of Claims and Notice of Potential Claims. It's important you read this portion of your policy so that you can act within the terms you are agreeing to when you purchase the policy.
How Withholding a Claim Can Impact Your Insurability
Not reporting a claim or potential claim and attempting to handle it yourself may seem like a helpful plan. However, from an insurance carrier's standpoint, it is anything but helpful.
By not utilizing your Lawyers Professional Liability Insurance policy and omitting information, you endanger your renewal and the insurability of your law practice.
Insurance carriers are not keen on insuring those who omit information. When an insured is upfront, the carrier can make plans and mitigate potential losses. When an insured fails to share relevant information, a red flag is flown on the credibility of accepting future risk.
Protecting Your Rights by Reporting Immediately
Reporting a claim or potential claim as soon as you have knowledge of it is important to protect your rights under your policy.
When you purchase a malpractice insurance policy you are investing in a defense counsel should a claim arise. This purchase is also an agreement, a contract if you will, to report any known claims or potential claims and have them be responded to by the insurance carrier. If you don't report matters, you are robbing yourself of the proper defense of the matter.
When a carrier receives notice of a claim or potential claim, they jump into action immediately. They collect details from the insured, round up the claims team to evaluate the matter, determine coverage, and assemble an A-Team panel of vetted defense counsel to connect with you and start taking legal action. The carrier's goal is to act swiftly and strategically to resolve that matter with minimal to no damage.
It is important to note the carrier will likely deny coverage to a claim that is reported after the "knowledge date". By not notifying the carrier immediately and attempting to resolve the matter yourself first, you could be jeopardizing your rights to have your insurance carrier respond to the claim.
Will Reporting a Claim Increase my Premium?
It depends.
If a potential claim doesn't develop and the matter is closed with no expenses incurred or paid, it typically won't impact your premium. If a claim becomes lengthy and accrues substantial costs, it is likely you'll see a premium increase.
Speaking to your agent about your premium increase due to a claim is necessary because each carrier is different in how they rate for claims activity.
Should I Switch Carriers if They Increase my Premium?
Sure, your premium may increase with your current carrier but remaining with your current carrier may still be your best option. Many admitted carriers will not offer policies to law firms who have open claims, or large claims within the past five years. This could lead you to only receiving offers from non-admitted carriers, which will cost much more than your increased premium. While your agent will do their best to secure admitted carrier terms for your firm, it is sometimes necessary to remain with a non-admitted carrier for several years.
Wrapping Up
When you purchase a Lawyers Professional Liability Insurance policy, you are purchasing the right to report a claim or potential claim and expect your carrier's claims team and defense counsel to step up and defend the allegations against you.
When it comes to your Liability Insurance and a claim… Report the claim or the potential claim. Whether you decide to accept coverage or decline coverage for the matter, reporting immediately will help to protect your rights under your policy.
