Why Did the Premium Go Up, Nothing Changed?

Kelan J. Vorbach, CIC

Coverage on a lawyers professional liability policy requires that the claim must be made during the policy period in which the firm was first aware of the circumstance AND the claim must be for services performed after the later of the firm’s retroactive date or the attorney’s date of hire. Because of this, the insurance carrier is liable for only one year of services during the first year of coverage. Therefore carriers discount the first year rate heavily. In the second year the carrier reduces the discount because they are insuring two years of services. The reduction in discount percentage is called a Step Level Increase. Step Level Increases continue until the full rate is charged. InNew Jersey, that is six years.

Step Level Increases apply to each individual attorney; so, a firm may have some attorneys at the full rate and some are at discounted rates due to their limited tenure with the firm. Having some understanding of Step Level Increases can help a firm in its decision making. For more information about how your particular policy works, 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.

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