Important Decisions to Make When Purchasing a Legal Malpractice Policy, 0814 RIBJ, 63 RI Bar J., No. 1, Pg. 11

• Author: David A. Grossbaum, Esq., Partner, Hinshaw & Culbertson LLP, Providence and Boston.

Important Decisions to Make When Purchasing a Legal Malpractice Policy

Vol. 63 No. 1 Pg. 11

Rhode Island Bar Journal

August, 2014

\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0July/August 2014

\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0 David A. Grossbaum, Esq., Partner, Hinshaw & Culbertson LLP, Providence and Boston.

\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0When you buy a legal malpractice policy, many terms are not negotiable. However, you do have a number of important options affecting the price and the scope of the coverage. These include: the limits of liability; the amount of the deductible; whether the deductible will be applied to payments of judgments and settlements only or will include the defense costs; whether the defense costs will reduce the limits of liability; and whether to buy coverage for acts committed all the way back to the beginning of your legal career or only cover you for work you do at your present firm.

\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0The Limits of Liability

\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0The limits of liability are the amounts available to pay any judgment or settlement and defense costs for claims made against you in a legal malpractice case. Under the standard policy, these limits are reduced by the amount of money the insurer pays for the defense costs. The defense costs include the legal fees incurred by your defense lawyer and any costs, such as deposition transcripts, expert witnesses, copies, and private investigators. When the carrier pays an amount equal to the limits, it has the right to cease providing any further defense and is not obligated to pay any more toward judgments or settlements.

\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0Policies have two liability limits - single and aggregate. The single limit is the amount available for each claim. Once the insurer pays out the single limit for an individual claim, its obligations are satisfied. The aggregate limit is the maximum the carrier will pay for all claims made against you and reported during a single policy period. For example, under a policy with a one million dollar ($1MM) single limit and a two million dollar ($2MM) aggregate limit, the company will pay up to $1MM to deal with each single claim, but will not pay more than $2MM with respect to all the claims brought against you. If the carrier incurs $500,000 for a single claim, you have $1.5MM left to deal with other claims under your policy, but not more than $1MM for any single claim.

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