Back to Basics with LPL

By Jennifer Dumont, senior vice president for Atlantic Risk Specialists Inc.

Navigating your way to a top- performing lawyers' professional liability (LPL) policy can seem like yesterday's news when compared with the ever-changing regulations and impact of social media and cyber liability. However, providing protection for a firm's reputation, defense and indemnification through proper coverage are the main objectives when insuring law firms. Addressing the additional exposures of social media, cyber liability and employment-related practices for law firms are essential to your client's risk management plan. With clients eager to make the jump to a new carrier to save premium, back-to-basics policy review and due diligence are in order.

Here are some items to keep in mind:

Areas of Practice: Do they add up? The application must fully reflect and warrant the firm's practice and operating history. These factors determine eligibility and rates charged, so double check your facts and figures for your clients to ensure they are correct and reflective of their current practices. Numerous area of practice charts are received that do not add up, and if the carrier doesn't have a fully accurate picture of the risk, it can cost time delays or affect the carrier's final rate. For the law firm completing an application, it's a time-consuming process, but the application becomes a part of the policy and determines the coverage. Take time to guide your client through the application process to ensure the best outcome.
How does coverage respond for ethics complaints and disciplinary proceedings where an insured has been alleged of violating a disciplinary rule? Disciplinary proceedings are not claims under a policy and the insured, not the carrier, has the obligation to defend and respond to these proceedings. However, many insurance carriers offer an enhancement to their policy that provides reimbursement for reasonable expenses incurred by the insured for the defense of such a proceeding where the violation is not proven. Typical reimbursement limits range from $10,000 to $25,000 maximum during the policy. Some carriers may include an aggregate for multiple expenses.
Have you reviewed how the definition of professional services is worded and how it will respond to law related tasks? Will services as a member of a formal accreditation board or publication of research papers be covered? Many insurance carriers provide coverage for the services in their definitions of professional services and also include related areas such as notary public, arbitrator and title insurance agent. We expect this clause to broaden over time with game-changing advances in technology, which create additional services and exposures to your client's firm. Ensure your client services are captured in this definition and likewise review the exclusions of services not covered to see if any of your client's services are excluded. If so, carriers may manuscript in coverage under special circumstances.
Are defense costs in or outside the limits and how does this impact coverage available? Have you explained how the defense provision works in the policy? Did you move the client to a new carrier for a cheaper premium, only to find out the incumbent carrier gave defense cost outside the limits of the policy and the new carrier has defense within the limits? You have basically eroded layers of available limits for your client. Each dollar spent on defending your client's claim leaves that much less available to pay for a settlement in a claim. Better options include an additional limit for claim expenses to at least offset some of the defense costs and allow more limit for payment of damages.
“Loss only,” “first-dollar defense,” “per claim,” “aggregated” and “50 percent offset” all represent deductible wording. Have you reviewed how the deductible provision is worded? In the example of “loss only,” the client does not incur out-of-pocket claim expenses to defend the claim. This attractive option could win many accounts over when the client is moved from a deductible provision that includes claims expenses or even a 50 percent offset provision.

Michael J. Honig, CIC, of Honig Conte Porrino Insurance Agency Inc., knows all too well the importance of accurate policy review, especially when clients ask Honig Conte Porrino to remarket in the hopes of saving some premium on renewal. “At times it works out where you are able to save the client premium and move them to a policy that is broader than current,” he said. “Other times we need to advise our client that even though an alternate carrier will save them premium in the short term, we find a deficiency in the coverage provisions that will give them less coverage and protection should a claim occur—for example, when moving coverage to a policy where the deductible has claim expense within the limit and their current policy is first dollar defense. At that point our clients can value our expertise and how we can advise them in protecting financial assets should a claim occur.”

See the sidebar “Know your Limits.”

Consider evaluating your law firm for employment related practices (EPL) coverage, which protects the firm from alleged wrongful acts in the workplace such as allegations of discrimination, wrongful termination and sexual harassment of employees or third parties. Monitor Liability Managers LLC provides an EPL product customized for law firms that will insure firms with five or more employees.

“With the increased use of social media and new technology, law firms face a growing list of complex and ever-changing risks. It's up to agents to make sure firms know about these exposures and offer them a comprehensive policy that addresses these new risks,” said Lynette Lyngaas, assistant vice president, employment practices liability, management liability, for Monitor.

Monitor's EPL product includes the following enhancements:

$100,000 sublimit for defamation, libel and invasion of privacy against a third party resulting from the use of social media; workplace bullying and social media defined; expanded definition of wrongful act to include workplace bullying
Third-party liability coverage for claims brought by customers for discrimination, including costs of defense for Americans with Disabilities Act (ADA) and public accommodation claims and/or harassment
Definition of insured to include partners
Coverage for failure to promote partner
$100,000 costs of defense for claims alleging violation(s) of the Fair Labor Standards Act (FLSA)
$25,000 costs of defense for criminal investigations brought by any government agency for alleged hiring or harboring of illegal aliens
A suite of risk management services including unlimited calls to a toll-free, confidential human resources helpline, MyHRHelp, a risk management site that provides resources covering all areas of workplace law and a subscription to a newsletter highlighting workplace law news and trends.

It's time to get back to basics for LPL with vigilant review of information presented, exercising good judgment and policy review, and helping your clients understand their policy contracts.

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