As a law firm evolves through the years, its insurance needs may change. Changes in a firm’s practice areas and clients might require different liability insurance limits than the firm required in the past. Raising policy limits to meet a law firms needs causes no coverage issues. But lower liability policy limits can cause unforeseen consequences.
Attorney Malpractice Insurance policies are written on a ‘Claims Made’ or ‘Claims Made and Reported’ policy form. This is unlike an “occurrence” policy form in many ways. One of the biggest differences is that with a “Claims Made” form the law firm will settle on the limits that are inforce at the time a claim is made not when the act occurs. With an “Occurrence” form the claim is settled on the form that is inforce when the act occurs not when the claim is made.
Given that your Attorney Malpractice policy will settle using the limits inforce at the time the claim is made if you lower the limits, you lower the limits back to the inception date of coverage for any newly reported matters. If you needed to have higher limits in the past, you may need to maintain the higher policy limits until you are sure that the statute of limitations has run for cases where higher limits were needed. You never want to find that you are underinsured, to save a few bucks, at the time a claim is made for an old forgotten case.