Educating your NJ or NY Law Firm on Errors & Omissions Insurance
Proper Limits
Carrying incorrect limits for your practice can be highly detrimental. Limits that are too low leave your firm exposed to large claims while limits that are too high create wasted premium dollars. Staggering the per claim and aggregate limits (i.e., $1M per claim/$2M aggregate) will prevent your entire limit from being exhausted due to a single claim.
Deductible
Your firm’s share of damages and claims expenses. The deductible typically directly correlates with the premium in that a lower deductible will mean a higher premium and vice versa. Deductibles can apply to damages only or both damages and defense costs depending on the state and policy.
Defense Costs
The costs associated with defending a claim often match or exceed those paid in the resulting damages. These costs can be included within the limit of liability available to pay damages (which will reduce the amount available to pay resulting damages) or can be in addition to the limit of liability available to pay damages (a separate limit is created to pay defense costs which will not reduce your limit to pay resulting damages). Most carriers will provide claims expenses in addition to the limit of liability for policies with limits of less than $1 million.
Prior Acts Coverage/Retroactive Date
Covers claims arising out of legal services rendered prior to the current policy period. If there has not been a lapse in coverage, carriers will apply a ‘retroactive date’ meaning that claims arising prior to this date are not covered. Generally, the retroactive date will begin concurrently with the first day of continuous coverage, regardless of any changes in carriers during that time. If you’ve had continuous coverage the entire life of your practice, the need for a specific retroactive date may be eliminated and replaced with ‘Full Prior Acts Coverage’ at the discretion of certain underwriters.
Broad Definitions of Insured and Legal Services
Additional services covered in conjunction with the firm’s practice of law decrease the exposure and risk of an unprotected loss. Common coverage definitions should include past, present, and future attorneys, as well as of counsels and independent contractors.
Extended Reporting Options
If your policy is cancelled or non-renewed (for a reason other than non-payment of premium) or if your firm closes its doors, an extended reporting option (commonly known as a tail policy) can be purchased to provide extended time to report claims. It does not constitute a new policy and any claim submitted during such a period will be governed by the underlying policy. Any claim that occurs between the retroactive date and the end of the underlying policy period will be covered. Some carriers offer an unlimited extended reporting period at no additional charge for retiring attorneys who have been with the same carrier for a certain period of time.