If a firm’s legal malpractice insurance is not renewed, here are some suggestions for the next steps.
Identify and Address High-Risk Areas
A decision of nonrenewal can feel scary at first, but it can also prompt the law firm or attorney to engage in reflection and self-review. The insured can consider whether it has policies or procedures that need updating, or even just ensure that it is comfortable with the procedures it already has in place.
If the reason for nonrenewal involves prior claims against the firm or the insurer’s concern regarding the firm’s practices, then corrective action may be beneficial. For example, if the insurer felt that the law practice was exposed to an extended statute of limitation for its failure to include limits in its engagement letters or for its failure to send file-closing letters, the law practice can use this time to decide whether it wants to amend its standard practices. Or, if the firm has accepted a matter outside the practice areas covered by the insurer, the firm can consider whether engaging in such matters merits exploring other insurers to obtain coverage.
After a nonrenewal, a law firm can use this time to make the upgrades to its systems and tools that it has been putting off. It may find that by making these improvements, it may be able to negotiate a better deal for premiums with its new insurer than it had with its old insurer.
Retain a Trusted Agent or Broker
The firm may consider starting from scratch by seeking a trusted broker to help the firm find a new insurer. A broker with a proven track record is invaluable to a law practice or attorney. A good broker often helps an attorney find the best program of insurance and navigates the marketplace for the best coverage from the best insurers at the best prices.
Brokers are primarily responsible for addressing law practices’ unique interests and needs with insurers. For firms facing unusual risks, brokers usually have the best recommendations for special insurers or programs.
Even after placement, brokers can help open the lines of communication with an insurer after an unfavorable or high-profile verdict against a practice. When this happens, brokers can use their business relationships with insurers to assist law practices in getting back on their feet and making sure that they remain covered.
Consider Insurers’ Expectations
Many brokers and insurers will share the kinds of risk management tools that they expect and prefer firms to use. These may be reflected in the application itself. Although no firm is “perfect,” some firms fall short in reviewing whether their practices conform with insurers’ expectations.
Recommendations from an insurer are typically grounded in experience, data, and results. Thus, before an insurer moves toward institutionalizing or recommending a risk management procedure, it often will have determined from the data that the procedure works and actually minimizes risk to law firms. Even if the law firm does not understand why the insurer encourages a specific practice or conduct, it is more likely than not that prior actual claims experience confirms that the procedure is beneficial.
Whether a recommendation is appropriate for a specific practice will depend on the applicable facts and circumstances; but usually such recommendations are at least worth considering.
By Randy Evans and Shari Klevens,
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