Four Reasons Law Firms Change Insurers

by Dentons
Contact

Dentons

A law firm may find that renewing its legal malpractice policy with the same insurer year after year is advantageous for a number of reasons. For example, the law firm and insurer may build a strong working relationship, and there is a lesser risk of "gaps" in coverage that can form when the law firm changes insurers.

However, at the same time, law firms that are too complacent with their current coverage and insurance policy may lose out on better, cheaper coverage that may be available as the insurance market changes. While each law firm has unique considerations in determining whether to change insurers, there are certain issues that will likely carry the most weight when assessing the pros and cons of switching. Below are four key factors.

Cost Considerations

The market for legal malpractice insurance is extremely competitive and can be volatile. In particular, when new insurers begin writing legal malpractice policies (or others phase out or consolidate), the change in competition may cause downward pressure on premiums. Thus, attorneys and law firms with a good claims history may have significant leverage when it comes to setting a premium. Insurers may be eager to underwrite a firm that has strong loss prevention techniques. (Some law firms even hire counsel to advise them on claim-prevention techniques that may be attractive to an insurer in setting premiums.)

Attorneys and law firms in this position thus can miss a great opportunity for cost savings if they blindly renew with their current insurer every year. Even if the firm is otherwise happy with its insurer, soliciting terms from other insurers can be valuable in negotiating the terms of the renewal policy.

Firms that may have a more spotted claims history are not necessarily limited to either extremely expensive insurance with the same insurer or, worse yet, going without insurance. Instead, certain insurance companies specialize in issuing policies to firms with a more extensive claims history while maintaining relatively reasonable premiums.

Of course, a firm should not choose its legal malpractice insurer based solely on price. Although insurance is a business commodity that can be valued, law firms should not focus on price to the exclusion of the actual terms of coverage and the firm's needs. Where the price varies dramatically between policies, firms should analyze the coverage provisions carefully to confirm that the coverage provided by the cheaper policy will provide the firm with the coverage it needs. However, where multiple insurers offer coverage on similar terms and have similar reputations, price certainly may be a more critical factor.

Broader Coverage

The policies available today vary dramatically from those offered by insurers even five or 10 years ago. Insurers are constantly reinventing coverage provisions to enhance coverage as a way to gain an edge over their competitors. Thus, by renewing on the same terms every year, law firms may be missing out on some provisions that are now commonly found in policies but may not yet be incorporated in the policy issued by the firm's current insurer. As with price, firms are well-served by investigating the coverage terms offered by other insurers and comparing them with the scope of coverage provided under their expiring policy.

For example, many legal malpractice policies now offer coverage for bar grievances, through which the attorney or law firm can receive a defense to a bar complaint even if the person filing the bar complaint has not yet made a demand or claim. Other policies provide preclaim intervention coverage, which may help firms mitigate potential losses or avoid claims altogether. Another new area of coverage is cyber security.

In addition, insurers may now be more agreeable to including a provision that allows insured attorneys or law firms to select their own defense counsel instead of being limited to a preapproved panel of attorneys. Indeed, policies may vary greatly, and thus law firms should evaluate whether their current coverage best meets their needs, or whether there are now better options elsewhere.

Insurance Companies Are Not All the Same

As with other businesses, the fortunes of an insurance company may change over time. Thus, a previously strong legal malpractice insurer in the marketplace may struggle, giving rise to concerns that the insurer may not have the resources to pay defense costs or indemnity as required under the policy it issued to a law firm.

Thus, before renewing their policy, many law firms will confirm the financial viability of their insurer with rating services such as Moody's or A.M. Best. While legal malpractice insurers tend to be highly rated, there are exceptions. Any downgrade in ratings could be a cause for concern and makes it worthwhile to see if there are stronger insurers providing equal or better coverage.

Another issue worth considering is the conduct of the insurer when a claim arises. Even if the policy provides broad coverage for a reasonable premium, the defense of a claim can be ineffective where the insurer is nonresponsive or generally difficult.

There is no reason to remain in a troubled relationship with a legal malpractice insurance company when there are other choices available. This factor can be just as important as the actual terms of the insurance policy.

Extra Benefits

In another effort to distinguish themselves in the marketplace, legal malpractice insurers are now going beyond the coverage terms to provide additional benefits for their insureds. For example, insurers may offer continuing legal education (CLE) courts that can help Georgia attorneys satisfy their annual requirements, or the insurer may perform audits of the insured law firm to help the firm identity risks in its practice.

These add-ons can be very helpful to law firms in limiting the risks of a potential claim and can even form the basis for premium credits in connection with future policies.

The decision of whether to change insurers is not one to be made lightly and, as noted above, there may be compelling reasons to stay with the same insurer for a long time. However, law firms should at the very least consider offers from competing insurers during renewal time to ensure their policy remains the firm's best option.

 

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Dentons | Attorney Advertising

Written by:

Dentons
Contact
more
less

Dentons on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.