How does Cyber Security Impact Your Law Firm?

October 4, 2013

The Department of Homeland Security has declared October National Cyber Security Awareness Month.  Unfortunately, cyber security can have more impact on your firm than you might like to admit. From international organized crime’s perspective, your law firm is a soft target. Depending on your areas of practice, there can be substantial amounts of personally identifiable non-public information in your files that may be extremely valuable to the criminal organizations that hack and hijack American computers. Family, estate, business, securities and intellectual property firms are particularly good targets.

What can you do?  Ask your network support people about encrypting data at rest, encrypting mobile devices and a hardware firewall. Many firms imagine they have a real firewall when all they have is firewall software. Some studies indicate firewall software is less than 10% effective. Most firms have bad security because they don’t know what to ask for and network support services hesitate to recommend upgrades that would make their services less price competitive.

Does professional liability insurance cover your risk? While some professional liability policies include network security/data breach in the professional liability limit, there are problems with this approach. While such coverage is definitely better than nothing, the scope and breadth of the coverage is extremely limited compared to a good stand alone cyber security policy. For firms that have the resources to afford the modest cost of a specialty policy, I highly recommend it, even if the professional liability or general office policy includes a cyber coverage feature.

For more information about the coverage provided by your current policies and options that may be available, talk to your agent or give me a call at 732-223-6611 ext. 108.

Kelan J. Vorbach, CIC is the Professional Liability Program Manager with John B. Wright Insurance. He has been interviewed by the national press (most recently National Underwriter, October 2013) and has been featured expert on nationally syndicated radio. You can check learn more at www.LawFirmInsuranceExpert.com.

What Are They Asking?

September 12, 2012

Kelan J. Vorbach, CIC

This question came in from a firm administrator, “On the Real Estate Practice Supplement, when they ask for the average value on real estate transactions, do they mean  the value of homes bought & sold or value of fees that we charged for the closing we handled?”

The insurance company wants the value of the property. Professional claims in the Real Estate Area of Practice generally relate to the value of the property in question. Real Estate attorneys in areas with substantially higher home values (Alpine, NJ, Sagaponack, NY, Greenwich, CT and so forth) represent a higher risk to the insurance company.

For more information or to ask a question of your own, contact me at www.LawFirmInsuranceExpert.com.

The Client Wants to be Named on Your Policy

April 12, 2012

Kelan J. Vorbach, CIC
Professional Liability
Program Manger,
John B. Wright Insurance

If a client asks to be named additional insured on your firm’s professional liability policy, don’t just say okay and have the office manager call your agent.   Making a client an additional insured allows the carrier to invoke the insured versus insured exclusion. The following policy wording is typical:

 

EXCLUSIONS

This insurance does not apply to claims:

4. Made by one insured under this policy against another insured under this policy.

 

The additional insured endorsement is normally used to make an over contractor an insured on a subcontractor’s policy, to protect the over contractor from claims made by third parties, where the over contractor may have vicarious liability for the subcontractor’s negligence. In the attorney client relationship, the client (rather than a third party) is by far the most likely claimant. Further, most clients are not attorneys so they have no professional liability exposure. The additional insured endorsement serves only to exclude coverage for the most likely claimant, the client.

 

Each situation is different. If you have specific questions contact your agent or give me a call.

Kelan J. Vorbach, CIC is the Professional Liability Program Manager with John B. Wright Insurance. You can check him out at http://www.LawFirmInsuranceExpert.com. For a consultation call 732-223-6611 ext. 108.

Now What Do We Do?

April 5, 2012

Kelan J. Vorbach, CIC
Professional Liability
Program Manger,
John B. Wright Insurance

This call came in from the office manager. The partners wanted to ignore the issue but the office manager thought I might be able to help.
The problem was a new hire. It was a key non-professional role in their busy office. The first time they thought it was a fluke. One day, the new employee didn’t show up and didn’t call in. When the employee arrived the next day, the explanation given was personal reasons. Management reviewed the policy on calling in with the new employee and assumed that was the end of it.
A few weeks later it happened again, no phone call and the employee was unreachable by phone. The firm left messages. The new employee responded by text message, again citing personal reasons but this time claiming he felt intimidated by one of the partners. The intimidation claim concerned the partners enough that they were just going to let it go and not do anything. Fortunately the firm had an Employment Practices Liability Insurance (EPLI) policy. In addition to covering employee claims of discrimination and harassment (including sexual harassment) the EPLI policy provides management tools and a toll free help line. A single call to the help line solved the problem. The firm was connected to an experienced employment law attorney who reviewed the facts of the case, including information regarding age, health, gender, orientation and ethnicity. By the time they completed that call they had the confidence to immediately fire the bad employee, knowing there was no reasonable basis for a claim.
While EPLI is an insurance product designed to pay employment practices claims and defense costs, the toll free confidential support is the most frequently used policy feature. The carrier benefits by assisting the firm in claim avoidance and risk reduction. The firm benefits from the management support they receive.
As a class, insurance carriers consider law firms a fairly high risk for EPLI claims. Therefore EPLI coverage for law firms is generally available only as a stand alone policy or as part of a management liability policy. If your firm does not carry Employment Practices Liability Insurance, I urge you to consider it. For more information contact your agent or give me a call.

Kelan J. Vorbach, CIC is the Professional Liability Program Manager with John B. Wright Insurance. You can check him out at http://www.LawFirmInsuranceExpert.com. For a consultation call 732-223-6611 ext. 108.

Choose Carefully

March 30, 2012

Kelan J. Vorbach, CIC
Professional Liability
Program Manger,
John B. Wright Insurance

In my blog I like to address real issues from real law firms. Usually it’s something positive. Today it is a cautionary tale. I got a call this week from a firm that had a problem with their agent and wanted to change agents right away. When a call starts like that, nothing that follows is good.
The firm is well managed; but, their back office routine broke down when a key individual had to care for a sick relative. The firm failed to pay their renewal premium and their professional liability policy lapsed. The consequences of a gap in coverage on a professional liability policy are severe. While replacement policies are available; as a rule, when there has been a lapse in coverage, underwriters will not offer prior acts coverage. In other words, they will not cover legal services performed prior to the effective date of the new policy.
The old policy gave them 60 days from the termination of coverage to purchase an extended reporting endorsement. For about $5,500 per attorney they could purchase the right to report new claims for all services provided from the founding of the firm (back in the 80s) through the last date of coverage when the policy failed to renew. New services would be covered by the new policy. Although the firm discovered the lapse in coverage in time to buy the extended reporting endorsement, their agent told them they didn’t need it. He said the new policy would cover prior acts.
Recently a claim came in for work the firm did years ago. The insurer denied the claim because the services were performed prior to the new coverage. The firm realized too late that they had gotten bad advice. The moral of the story is that advice you receive from the agent providing your professional liability insurance can have serious consequences. Choosing an agent based on a family relationship, connection to a particular partner or other affiliation can be a big mistake. Any agent can go to a wholesaler and get you a professional liability policy. That doesn’t mean they have the experience to give you good advice. Ask tough questions. Ask if they insure other law firms and if they will let you talk to them. Be careful who you choose to handle your professional liability insurance.
Each carrier’s policy contains different language and endorsements to change the policy language may be available. For specifics on how your policy handles prior acts coverage call your agent or contact me for a consultation.
Kelan J. Vorbach, CIC is the Professional Liability Program Manager with John B. Wright Insurance. You can check him out at http://www.LawFirmInsuranceExpert.com. For a consultation call 732-223-6611 ext. 108.

Does My Policy Cover Work I Did at My Old Firm?

February 10, 2012

Kelan J. Vorbach, CIC
Professional Liability
Program Manger,
John B. Wright Insurance

The firm that called this morning was established recently. The attorneys left a firm where they had been associates together. Now the old firm is initiating collections against several clients the attorneys had handled. The attorneys in the newly formed firm, concerned that the collection activity will result in counterclaims, wanted to know how they would be covered.

The answer doesn’t lie in their new policy. Because the new firm is not a successor firm, their policy only covers services performed by the new firm once the new firm’s policy started. Any coverage that may exist for services performed at the old firm is on the old firm’s policy. Lawyers Professional Liability Policies are designed to cover former partners and employees. However, there are several ways coverage could be impaired.

• The old firm’s policy might have a fee suit exclusion. Such exclusions for counter claims are generally applied if a firm has a lot of fee suits.
• The old firm may have cancelled or lapsed its coverage or may have impaired limits of insurance.
• A poorly completed renewal application can compromise coverage.

The fact of the matter is that attorneys who are not owners (or are not part of the majority ownership group) are not in control. They don’t control the insurance and both prior acts coverage, and coverage for departed attorneys follows the firm where the legal services were performed or its successor. That is the bad news. The good news is that the old firm (or its successor) normally can’t impair coverage for former partners & associates without impairing coverage for current partners & associates.

The content of this post is general in nature and may not apply to your policy or situation. To discuss specifics or to learn more about this or other topic involving insurance for the legal profession please call me at 732-223-6611 ext. 108.

He Looked Before He Leaped

January 26, 2012

A partner with an established firm located in central New Jersey asked me smart question. Questions that come before the firm does something and include the words, “What are the ramifications of…” are always smart questions.

In this case, the attorneys that are with the firm are all admitted only in New Jersey. A prospective new hire is admitted in both New Jersey and New York. What are the ramifications of having an associate that is also licensed in New York?

Traditionally, just being licensed in another state doesn’t have any impact on professional liability insurance. While I have seen policies with specific state exclusions, these are rare in my part of the country. Some carriers ask what precautions are taken to ensure compliance with state specific issues like statutes of limitations if the firm accepts cases in states where the firm does not have offices. It is not a big deal, they just want to make sure the firm is taking prudent steps to avoid stepping into a problem.

New York State has some unusual workers compensation regulations that may come into play for out of state firms, depending on the amount of time firm personnel spend in New York. These are easily addressed, just let your agent know before you send people to New York.
Of course, each carrier’s policy contains different language and endorsements. For specifics on how your treats other states call your agent.
Kelan J. Vorbach, CIC is the Professional Liability Program Manager with John B. Wright Insurance. You can check him out at http://www.LawFirmInsuranceExpert.com. For a consultation call 732-223-6611 ext. 108.

We Plan to Hire an Independent Contractor. Does Our Policy Cover Her?

January 10, 2012

Kelan J. Vorbach, CIC

The the question that is the title of this post may not be the right question. Does the firm want to be covered for the independent contractor’s wrongful acts or does the firm want to cover the independent contractor?  

Normally, the firm is covered for professional claims regardless of who performs the services.  Current and former owners, partners, employed lawyers and of counsel attorneys are similarly covered for work done on behalf of the firm.  The carrier will defend both the firm and the individuals.

Independent contractors are generally treated less favorably. Though the carrier will respond to claims against the firm based on the services the independent contractor performed on behalf of the firm, they may not respond to claims made against the independent contractor for those same services. Further the carrier may try to shift all responsibility to the independent contractor if both the firm and the independent contractor are sued.    

Of course, each carrier’s policy contains different language and endorsements to change the policy language may be available. For specifics on how your treats independent contractors call your agent.

Kelan J. Vorbach, CIC is the Professional Liability Program Manager with John B. Wright Insurance. You can check him out at www.LawFirmInsuranceExpert.com. For a consultation call 732-223-6611 ext. 108.

Our Firm Has Professional Liability Insurance, What Else Do We Need?

January 4, 2012

Kelan J. Vorbach, CIC

A variety of policies are needed to address the risks of a law firm. The most basic coverage portfolio includes:

  • Professional Liability (Legal Malpractice)
  • Business Owners Policy or Commercial Package Policy
  • Workers Compensation

This starter set, properly configured to the individual firm, addresses a wide variety of potential claims. I use the phrase “properly configured to the individual firm” because I often review policies that aren’t. Since professional liability is generally the most expensive of the three it generally gets the most attention while the other policies are automatically renewed and generally ignored. Most firms also face significant risks that the basic portfolio doesn’t cover or fails to address adequately. Additional policies most firms should consider include:

  • Privacy Liability (A/K/A Data Breach or Cyber Liability)
  • Employment Practices Liability
  • Directors & Officers Liability
  • Employee Dishonesty
  • Excess Liability
  • Buy Sell Life & Disability

Why don’t firms address these exposures? The reason may be money or lack of awareness. A firm’s insurance advisor may be reluctant to make recommendations that may not be well received because they result in higher premiums. If the firm is buying policies piecemeal from different agents, the firm may not have any one agent who feels responsible to provide advice. While most firms face similar risks, generally the more successful firms do a better job at insuring them with broader coverage.

In addition to the policies listed above, a firm may have specific coverage needs. For example if they provide company cars to partners they may need a business auto policy. They may need an ERISA bond or they may wish to offer group benefits. If you only have the starter set or if it has been years since you reviewed each component of your insurance portfolio, you have reason to be concerned. Make an appointment with your agent to review your policies or give me a call at 732-223-6611 ext. 108.

Kelan J. Vorbach, CIC is the Professional Liability Program Manager with John B. Wright Insurance. You can check him out at www.LawFirmInsuranceExpert.com.

Is Our Firm Covered if Somebody Hacks Our Files?

December 7, 2011

Kelan J. Vorbach, CIC

While most professional office policies include coverage to reconstruct paper or electronic records, there are bigger risks they don’t insure. Every day there are stories in the news about a business being hacked or exposing client or personnel information through human error. Most firms don’t process credit cards or collect social security numbers; but, identity thieves can piece together seemingly innocuous information to commit fraud. Privileged and confidential information can be used for cyber extortion.

A data breach can compel the firm to report the incident to government agencies, provide notification and credit monitoring to all victims whose data may have been compromised and the firm may be required to set up a web-site and phone bank to assist those whose identities are at risk. This applies even if the records did not include credit card information or social security numbers. The cost of notification and credit monitoring is about $200 per identity. This cost does not include the firm’s liability for damages based on release of client data.

Though most insurance policies don’t cover what is referred to as data breach, cyber liability or privacy liability; it doesn’t mean you can’t secure coverage for your firm. Policies are now available at a wide variety price points to address the risk of your data falling into the wrong hands.

For more information about the coverage provided by your current policies and options that may be available, talk to your agent or give me a call at 732-223-6611 ext. 108.

Kelan J. Vorbach, CIC is the Professional Liability Program Manager with John B. Wright Insurance. You can check him out at www.LawFirmInsuranceExpert.com.