Call Us Today For A Free Quote | 866.940.1101
Professionals Insuring Professionals
 

Bad IdeaAttorneys are very intelligent creative people who sometimes do dumb things.  Attorney Malpractice Extended Reporting Period Endorsements (ERP or Tail) are expensive.  Some firms have gone to great lengths to figure out ways to avoid buying an ERP to save money.  Unfortunately for the attorneys a bad creative solution can be costly.  The following money saving idea for an alternative ERP is not recommended.

A three member law firm decides to end their partnership.  The firm is splitting up 1/3., 1/3, 1/3.  The firm is advised to buy an ERP for the Firm’s current Attorney Malpractice policy as none of the new firms will constitute a predecessor firm for insurance purposes.   (Basically most Attorney Malpractice Insurance policies require at least a majority of the assets end up with one new firm to have a predecessor firm.)

The Firm decides that purchasing an ERP is too expensive.  So they agree that each member will buy a new attorney malpractice policy with ‘career coverage’, to protect each attorneys individual past acts.  Each attorney knows that if they get sued for something that happened at the old firm the individual attorney that performed the act will have coverage but the other members will not. 

No worries.  The firm members decide to draft a side agreement that obligates each attorney to pay for any matter that might arise from the old firm equally 1/3, 1/3, 1/3.  Problem with this is that their new malpractice insurers are not obligated to provide a defense or coverage based on this agreement.  So even though the one insurer that insures the attorney that might commit the act will likely pick up the full indemnity payment each attorney is now obligated for 1/3 of the damages.

The firm splits up.  Problems start with the firm’s idea to not buy an ERP from the very beginning.  One member decides not to purchase a new policy on a timely basis.  That member does eventually purchase a new policy but because it took so long it was done without prior acts cover and no career coverage.

Of course less than a year later, the member that did not have ‘career coverage’ gets sued for work done while at the old firm.  This attorney has no insurance coverage for this work.  The suit not only names this individual member, but the other 2 former members of the firm individually and as a firm.  The 2 former members that have ‘career coverage’ are provided a defense by their new malpractice insurers.  But they were left to pay the damages out of their own pocket which was many times the cost of the ERP.  The side agreement of ‘mutual aid’ was not honored by their new malpractice insurers.

Share |


No Comments


Post a Comment
Name
Required
E-Mail
Required (Not Displayed)
Comment
Required


All comments are moderated and stripped of HTML.
Submission Validation
Required
CAPTCHA
Change the CAPTCHA codeSpeak the CAPTCHA code
 
Enter the Validation Code from above.
NOTICE: This blog and website are made available by the publisher for educational and informational purposes only. It is not be used as a substitute for competent insurance, legal, or tax advice from a licensed professional in your state. By using this blog site you understand that there is no broker client relationship between you and the blog and website publisher.
Blog Archive


View Mobile Version
Quick Contact
Referrals
We love referrals! And thank you even more for your continued business.
Customer Service
Self policy service any time of the day, directly from our website.
Join Our Newsletter
Stay in touch with the latest events, news and offers we have.
From Our Blog From Our Customers
Read More Read More
Stay In Touch With Us Helpful Site Links Read the News
Sign up now to receive new and updates Stay up-to-date with the latest industry, community and agency news through our newscenter. We also provide handy hints on how to save on your insurance.

Read More
We have the expertise to find you the right coverage at the right price 
Powered by Insurance Website Builder