Archive for the ‘Professional Liability’ Category

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.

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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.

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.

Why Do Bad Things Happen to Good Attorneys?

November 21, 2011

Kelan J. Vorbach, CIC

About 90% of professional liability claims against lawyers end up closing without any payment of damages. Defending groundless claims is expensive, a hassle and a waste of time. While there is no magic way to prevent groundless claims there are some things you can do to reduce your risk.

  • Client Communication – Clients who are kept informed are more inclined to like you and feel you care about them. Clients that have those feelings are far less likely to sue you.
  • Client Selection – Trust your gut if you have a bad feeling about a potential client in the initial consultation. It is surprisingly common for lawyers with claims to tell me how they ignored warning signs and accepted clients against their better judgment.
  • Conflict of Interest – Do the conflict check before you agree to represent the client and be extremely careful about acting in dual capacity, even with a waiver. Just because you have signed conflict waivers doesn’t mean you won’t have a claim. 
  • Control Expectations – If you keep the client in the real world from the beginning they are far more likely to understand and accept the outcome.
  • Define the Scope – Whether you use engagement letters or retainer agreements define the scope of services and the terms of the attorney – client relationship. True story, aNew Jerseyreal estate firm successfully closed a deal on a commercial property after another firm failed to do so. The client then sued for failure to advise them they might have malpractice claim against the first firm. An engagement letter limiting the services to doing the closing could have saved big money. 
  • Declination Letters – If someone is a bad potential client they may be even worse if they come back long after the initial consultation claiming you said you would take care of everything. Use declination / statute letters when you’re not going to take a case. 
  • Calendar Management – Whenever possible use redundant systems with two different people making entries. Then cross check them regularly to be sure noting was missed.
  • Timely Payment – Collect sufficient retainers and send regular monthly invoices. This helps the client understand the costs and helps prevent having to sue for your fee. Fee suits often result in counter-claims for malpractice. 

The items above are not a comprehensive risk management plan, its just food for thought.   If you would like to discuss or if you have any questions related to insurance for a law firm, give me a call at 732-223-6611. 

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

How does a new practice area affect professional liability?

October 17, 2011

Kelan J. Vorbach, CIC

A client sent me a great question,

 “If I handle a divorce and family law wasn’t specified on my malpractice application, do I need to to inform my carrier?”

You don’t have to tell your carrier immediately but you should talk to a professional liability specialist before venturing into any new area.  Most policies cover without limitation to the areas indicated on the application (assuming you disclosed all areas that applied at the time of the application). New areas must be disclosed on renewal.

 However, some areas dramatically increase your price for years, even if you only perform a one time service. Since it is better to know what you are getting into you should consult with an agent versed in professional liability before you are committed. A general practice firm that dabbles in a high risk area can spend more in premiums than they made in fees. 

If you have a question write me or call 732-223-6611.

www.LawFirmInsuranceExpert.com

How do you reduce the risk of a new hire creating professional liability problems for your firm?

October 12, 2011

Kelan J. Vorbach, CIC

It is critical to vet the attorney before hiring. A great tool to do this is a New Lawyer Supplement form that you can get from your professional liability carrier. These forms ask probing questions about claims and circumstances involving the individual attorney. While the carrier may not require the form until renewal time it is better for the firm to know BEFORE hiring.

You should be careful about files the new attorney is bringing from the old firm. These can be a source of claims so ask questions and be prepared to probe deeper.

Once you’ve made the hire, train and observe to make sure the new attorney complies with your firm’s standards and procedures. Their last firm may have had different controls and their routines may not fit with your system.

To learn more about this or any other lawyers’ professional liability question, or to get a second opinion on your policy, please call me at 732-223-6611 ext. 108.