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.

Advertisements

Why Do Bad Things Happen to Good Attorneys?

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?

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?

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.