Malpractice insurance coverage basics
In our last article, we discussed the importance of all lawyers buying sufficient malpractice (sometimes called “errors & omissions”) insurance coverage, and why it is important for clients to ask whether their potential counsel has malpractice insurance. In this article, we ask a couple of additional questions: What should a lawyer look for in an insurance company? And, what factors will be considered by the company when quoting coverage? We’ll address the first question here, and the second in a subsequent article.
So what should a lawyer look for in an insurance company? Many lawyers choose malpractice coverage based on the lowest quote received, often without ever considering the financial health or strength of the company that they are purchasing the policy from. This is potentially dangerous. In our opinion, consideration and selection of a company boils down to two factors: (1) the strength of the company that underwrites the policy; and (2) how the company handles claims.
As to the first factor, a few years ago, lawyers in Georgia learned the hard way that the financial strength of the company underwriting the policy is critical. Insureds of a company called ANLIR received a letter notifying them that the company had been placed into receivership, that they no longer had any coverage through the company, and that possibly no funds would be available to pay claims. This left law firms scrambling to the marketplace to buy coverage. Those with pending claims had an even tougher time, along with their lawyers if the claims were in active litigation. The only way to address this risk is to be mindful of the company’s financial health and strength. In today’s marketplace, it is not uncommon to buy a policy through a company and have the policy underwritten by another company. For example, our firm purchased our malpractice policy through Southern Lawyers Insurance Program, and our insurance policy is underwritten by Lloyds of London. As a general rule, the larger the insurance company, the safer you probably are, although, of course, there can never be any guarantees. .
As to the second factor, a lawyer shopping for coverage should also investigate how a company handles the claims it receives from its insureds, by asking other lawyers. We have heard horror stories about lawyers trying to report claims to their carrier, only to be ignored or receive a letter directing the insured to notify the carrier if a lawsuit is served on the insured. This is certainly not the type of proactive response anyone facing a claim, grievance, or malpractice suit wants to receive. There are a few companies which proactively handle claims, and a few may assign an adjuster or counsel early in an effort to repair a potential claim before it escalates into a lawsuit or spirals out of control. Another consideration on this point is where the claims department is physically located. We are of the opinion that a lawyer should look for a company with claims adjusters ideally in the lawyer’s home state, whenever possible. When facing a potential claim, lawsuit, or disciplinary grievance, having a claims professional or counsel close at hand who understands the state law, ethical rules, and dynamics of the location can be very helpful with claim repair, resolution, and defense.
While Chandler & Moore Law receives many phone calls from lawyers around Georgia asking questions about insurance coverage and things to consider, we are not insurance agents and cannot recommend one policy over another. However, having dealt with many insurance companies on behalf of both plaintiffs and insureds, we would be happy to discuss our experiences and answer any questions you may have. Feel free to contact us at 404-593-2670.