Vol. 32, No. 4, 8. What You Need to Know Before You Shop for Legal Malpractice Insurance.

• Author: By Mark Bassingthwaighte, Esq.

Wyoming Bar Journal

2009.

Vol. 32, No. 4, 8.

What You Need to Know Before You Shop for Legal Malpractice Insurance

Wyoming LawyerIssue: August, 2009What You Need to Know Before You Shop for Legal Malpractice InsuranceBy Mark Bassingthwaighte, Esq. I have yet to read an insurance policy that I would consider a great read, so let's admit itand#8212;insurance can be a rather boring topic for most folks. There's nothing necessarily wrong with this, as long as your policy covers you for what you think it should when you need it to. But what happens when that isn't the case? What happens when there is a provision in your policy that excludes coverage for something that you assumed was covered? This was a problem for many post-Hurricane Katrina. A number of homeowners thought they had coverage for damage resulting from a hurricane but failed to understand that the flooding that hurricanes often bring was excluded from coverage. For me, this represents the classic problem of running with assumptions.

I am not trying to convince you to run to your insurance file and read all your policies cover to cover. Trust me; that will put all but the heartiest of souls to sleep. I am, however, hoping to have you appreciate that running with assumptions about what your malpractice policy covers is a risky play, because even in malpractice settings, sometimes "hurricanes" happen. With this in mind I have listed a number of pointers to assist you in the purchase of a legal malpractice insurance policy shared with the intent of removing assumptions.

The Basics

All legal malpractice insurance policies are claims-made products, and "claims-made" is one of those terms that is frequently misunderstood. Under a claims-made policy, an attorney is afforded coverage for claims made and reported to the insurance company while a policy is in force. Further, and this is the important piece, the act, error or omission upon which the claim is based had to occur after the policy's retroactive date. The retroactive date is usually the inception date of the first claims-made policy purchased as long as there has not been a gap in coverage. Malpractice policies provide coverage for one year, and in order for an attorney to have coverage in force at all times, a policy must be purchased (or renewed) every year. Finally, an attorney can only purchase or renew malpractice coverage while in active practice.

Sometimes an attorney or firm will fail to understand the significance of the retroactive date (and what we're really talking about here is prior acts), and purchase a policy that makes the retroactive coverage date and the policy inception date the same date solely to save significant premium dollars. Unfortunately, this savings brings with it a significant gap in coverage. The premium is less in this situation because the policy is not going to provide coverage for any prior acts. In short, a business decision was made to start fresh because the attorney or firm...