What is a claims-made and reported insurance policy?
Lawyers Mutual offers a claims-made and reported policy, which is now the most common policy form for professional liability insurance. This policy requires that a claim be first made against the insured attorney and reported to the insurance company within the policy period. With a claims-made and reported policy, two conditions must be met to trigger coverage. First, the claim must be made and reported to Lawyers Mutual during the term that the policy is in effect. Second, the act, error, or omission giving rise to the claim must have occurred on or after the policy’s retroactive date. Malpractice committed prior to the retroactive date is not covered. Lawyers Mutual often offers policies with no retroactive date, which means that we offer coverage for any prior acts, errors, or omissions that result in a claim first received and reported during a policy period.
What is the "Declarations Page"?
The Declarations Page identifies the named policyholders, the amount of coverage purchased by the Firm, the deductible, the policy term, and any special forms, such as endorsements.
What are policy "limits"?
The amount of coverage selected by an attorney is subject to two policy limits:
- A per claim or occurrence limit, and
- An annual aggregate limit for all claims made during the policy period. For example, the policy may specify the limits to be $500,000 per claim and $1,000,000 as the annual aggregate for all claims (referred to as $500,000/$1,000,000). The per claim limit, expressed as the occurrence limit, means that the company will pay no more than that sum as the total amount for all claims arising out of the same act or omission (or related acts or omissions) regardless of the number of claimants. The “aggregate” limit is defined as the total limit of a company’s liability for all claims made within the term of the policy, plus any additional time provided for in an extended reporting endorsement. The limits apply to cost of defense as well as indemnity. For example, if a policyholder has a $100,000 policy, a claim that results in $20,000 in defense costs above the policy deductible, and a $90,000 judgment, the insured will owe the $10,000 difference in the cost of defense and indemnity and the $100,000 policy limits.
What should I do if a lawyer either leaves or joins my firm during the policy period?
If a lawyer leaves your firm during the policy period, we require you to notify us in writing of the date of the attorney’s departure. Coverage under your policy will not be provided to the departed lawyer for professional services rendered after the date of departure from your firm. If you add a new associate or partner during the policy period, we also require you to notify us in writing of the date on which the lawyer joined your firm. This is the date coverage will begin for your new hire. New partners and associates joining your firm receive immediate coverage at no extra charge during the current policy period. However, you must decide whether your policy will cover the prior acts of your new associate or partner. If you do not wish to provide prior acts coverage, an endorsement must be added to your policy; otherwise, your deductible may be at risk for an act of your new hire that predated the date of hiring.
Is it possible to maintain insurance coverage after I cease practicing law or retire?Lawyers choosing either to stop practicing law or to retire may continue to be insured by purchasing an Extended Claims Reporting Period Endorsement, more commonly referred to as a “tail policy.” Such an endorsement extends the period of time allowed for the reporting of claims based on incidents that occurred prior to the expiration date of your policy. Because the “tail policy” is simply an endorsement to your current policy, the policy terms, conditions and liability limits remain the same. It is important to understand that the endorsement does not provide coverage for your current acts. It only extends the time period for the reporting of claims based on your acts prior to your policy’s termination date. Lawyers Mutual offers several “tail” options.
Court Bonds FAQs
Do you charge an annual renewal premium for administrator or executor bonds that are $25,000 or less?
No. These types of bonds are a one-time premium provided the bond amount stays at $25,000 or below.
If the bond is canceled within the first year, will you return any unearned premium?
No. The first year's premium on ALL bond types is fully earned and there is no refund.
If the court enters an order fully restricting all the assets in a probate estate so that funds cannot be released without a court order, do you continue to charge a renewal premium for that bond?
No. Provided the bank provides a verification of restricted account for the full amount of the assets in the estate and the Bond penalty is reduced to $2,000 or less, no further premium will be charged as long as the full amount stays restricted and the reduction of the bond penalty remains in place. The principal may also receive a pro-rated return on the premium already paid depending on the date the funds were restricted and reduced.
If I pay the renewal premium and the estate closes shortly after the renewal date, will I get any of that premium back?
Yes. To the extent the amount of premium attributable to that portion of the year that the bond is not needed exceeds the minimum premium of $100. e.g.: If an estate closes 3 months after the bond renews and the bond renewal premium is $250, to calculate the “unearned premium” you multiply the bond renewal premium by the percentage of the year the bond is not needed. ($250 x .75). The unearned premium amount in this example is 187.50. The total bond amount less the unearned premium is the “earned premium”. 250-187.50=62.50. Since the “earned” amount is less than the $100 minimum, $100 will be retained and the difference ($150), will be returned to the principal.
Do you charge renewal premiums for court bonds other than probate?
Do we require joint control? (This means that someone in addition to the fiduciary must approve the release of funds from the estate bank account.)
We DO require joint control in conservator estates $25,000 and greater, and for Trustee’s bonds. Procedure: The fiduciary establishes two bank accounts, one that is a working account and is not subject to the two-signature requirement; the other is subject to the two-signature withdrawal requirement. The fiduciary initially funds the working account with enough money to cover the reasonable and anticipated expenses of the ward over the course of one year. All other assets are placed in the “restricted” account and/or in a safe deposit box subject to the joint control agreement. If the working account is properly funded, the attorney should only need to be involved once per year in authorizing the refunding of the working account. There are some exceptions to the rule requiring joint control.
Do you require collateral on bonds?
Only on court bonds other than probate and not on probate bonds, unless the applicant fails to meet our underwriting standards. Our office must receive collateral BEFORE a bond can be issued. Sometimes it can take up to two weeks to get a letter of credit from the bank so we always encourage the attorney/agent to get the principal to start the process immediately upon receiving our application.
Do we check the credit history of the principal?
What information do you need besides the application to make an underwriting decision?
It depends on the type of bond being written. Each application lists the additional documents that are needed in order to underwrite the bond. Generally, probate court bonds require only an application. The court bonds other than probate require the application, a current financial statement, a copy of the relevant pleadings, and most likely full collateral.
Why do you require joint control or collateral, aren’t we buying an insurance policy?
No. A surety bond is not an insurance policy. A policy of insurance is designed to protect the insured against an unexpected loss. A surety bond, on the other hand, is designed to protect the obligee, which is the person or persons to whom the principal (the person being bonded) owes some duty or obligation. A person buys a bond because they have an agreement with a third party who requires a guarantee that the obligation will be fulfilled.