Special Situations

If one of the following is true, your firm may need to seek professional liability coverage in the specialty insurance marketplace:

• The high-liability nature of your firm's practice
• An adverse history of claims or disciplinary actions

High-Liability Practice Specialties

Although there is no hard and fast rule, many underwriters consider the following practice specialties as high liability:

• Class Action litigation, Plaintiff 

This area of practice has become a hot-button issue with most underwriters, resulting in higher liability insurance rates for firms that practice in this arena. Obviously, law firms representing lead plaintiffs are subject to the closest scrutiny, but even those attorneys and firms that do not represent lead plaintiffs may also find it difficult to obtain reasonably priced malpractice insurance coverage.

• Real Estate (primarily commercial) and Foreclosures 

Many folks are surprised to learn that real estate runs a close second to personal injury when it comes to claims frequency, amounting to about 22% of all legal malpractice actions. Of course, the degree of perceived risk varies widely, depending upon the exact nature of the practice and where the firm is located.  For instance, in our backyard here in New York City, commercial real estate has always very contentious; some might even call it a "blood sport".  Oversized egos and high property values can lead to high-stakes disputes.  Foreclosures, of course, carry a high degree of emotion, particularly when dealing in residential matters. Some carriers are reluctant to write firms with heavy commercial real estate exposure. Others continue to be comfortable with and committed to writing well-managed real estate firms.

• Debt Collection, particularly retail/consumer matters

The Fair Debt Collection Practices Act (FDCPA) and Fair Credit Reporting Act (FCRA) have become the weapons of choice for debtors who believe the old axiom that, "The best defense is a good offense." While many claims arising from alleged FDCPA or FCRA violations are ultimately dismissed, defending the claims are expensive. Underwriters may insist on a relatively high deductible for law firms with a substantial collections practice. Thus, it falls to the firm itself to defend nuisance matters, reserving insurance for more significant claims. A few underwriters are even excluding coverage for FDCPA or FCRA violations. Your broker must be aware of all of the potential pitfalls, in order to design coverage that fits the highly specialized needs of your practice area.

Contractual relationships, constant deal-making, purchase and sale of intellectual property and contract rights, all serve to make entertainment law a potential minefield for conflicts.  Stir in a large dose of egos, high-stakes negotiations.

Adverse Claims/Disciplinary History

Firms that have incurred one or more malpractice claims or disciplinary proceedings frequently receive a Notice of Cancellation or Non-Renewal from their professional liability insurance carrier.  While we have seen some instances where a well-thought-out appeal to an underwriter can result in the reinstatement or renewal of coverage, this is very much the exception to the rule. Usually, the underwriter's initial decision is final.

If your firm is facing cancellation or non-renewal of your insurance coverage, you MUST begin trying to obtain replacement coverage as soon as you become aware of the pending non-renewal. DO NOT PROCRASTINATE!  Any delay can have potentially catastrophic consequences.  Even if you are appealing the non-renewal to your current carrier, please give us a call so that we can evaluate your situation. If your appeal is successful, great! However, we have clients who, while successful in obtaining reinstatement from their prior carrier, received such a significant rate premium increase that it was advantageous to move their coverage to a new insurer anyway.

In situations such as this, the question of retroactive coverage (“prior acts”) inevitably arises. Depending on the circumstances, it is sometimes best to purchase an extended reporting period endorsement (“tail”) from the prior carrier, and start the replacement policy on a "retro-inception" basis (no prior acts coverage). This can effectively quarantine the past problems with the old carrier. If the past problems aren't terribly significant, it may make sense to obtain prior acts coverage (sometimes referred to as "nose" coverage) from the new carrier.

What can you expect when you contact us?

Initially, we need to know exactly what your situation is.

If we are to help you obtain coverage for you or your firm, it is important that we start things off right, in an atmosphere of mutual professionalism and respect. If we find that a prospective client is not fully prepared to provide the information we need, we have no choice but to decline the assignment. No single account is worth jeopardizing our own reputation with underwriters.

What Happens Next?

If there is a mutual agreement to move forward, we generally ask you to complete an application, including claims information supplements on each claim, whether open or closed. Sometimes, we can use an already completed application, at least for initial underwriting purposes. We will need a copy of your current policy declarations, as well as a claims history report (often referred to as "loss runs") from the prior carrier(s). We generally want a minimum of five years of loss history, but the more we have the better. Naturally, any additional documentation that you can provide will help an underwriter evaluate your firm.

Once we have a complete file, we will then begin the submission process. It is always possible that a particular carrier will request additional information, and we know that you will provide any information requested in a timely manner.  As we begin receiving responses from the carriers, we can then discuss the pricing and terms offered, and negotiate different terms if necessary. We consider such variables as higher or lower limits, higher or lower deductibles, possible exclusions or restrictions, with or without retroactive coverage, etc.

How About Payment?

There is no question that non-standard, specialty coverage can be expensive, or at least more expensive than a firm has paid in the past. We can arrange premium financing through third party, licensed premium finance companies at competitive rates. Or a firm may secure its own financing by utilizing an existing line-of-credit. 

Once negotiations are complete and all of the decisions have been made, we can then bind coverage. When we are confirmed bound, we can issue a written binder pending the receipt of the actual policy and issue certificates of insurance to those requiring them.

Will Our Firm Ever Be Able To Get Back Into The Standard Market?

This is a question that we are asked frequently. The answer is almost always "YES" but it is dependent on your specific situation. We work closely with our non-standard clients to evaluate the problems the firm has encountered, and what our clients can do to make sure any problems are corrected. Sometimes, this is straightforward. For example, we once saw a firm that had never had a claim in its entire 15-year history. Someone in the firm decided that there were too many seriously past-due accounts, so the firm filed several lawsuits to collect their fees. Unfortunately, this resulted in several countersuits alleging malpractice. While these counterclaims had little if any merit, the matters had to be reported to and defended by their carrier. Almost all were either dismissed or settled for nominal amounts, but now this previously claims-free firm had a "claims frequency" problem. On their insurance anniversary date, their long-time carrier declined to renew their coverage.

The firms insurance broker at the time represented only a single carrier. That broker had nowhere to turn. Fortunately, we had many options for this firm and were able to solve their problem. We convinced one of our standard market carriers to insure the firm, though with a surcharge and an exclusion for any future claims arising as a result of a suit-for-fees situation.

We sometimes recommend that a client retain an outside law firm to conduct a loss-control audit. We have excellent relationships with a number of well-respected attorneys, recognized experts in the field of legal malpractice and/or legal ethics. While this review may cost several thousand dollars, it sends a very clear signal to underwriters that the firm not only recognizes that there is a problem, but that they are serious about addressing the issues.

Disciplinary Proceedings, Including Criminal Matters

Another closely related area of non-standard underwriting involves attorneys and law firms that have been the subject of disciplinary proceedings, or even have been convicted of crimes. This may involve suspension or even disbarment. This is an area in which we have placed coverage, often in cases where other insurance brokers have given up. Coverage in such cases can be expensive, and it is often written with restrictive endorsements. It can, however, allow an attorney to return to the practice of law. Eventually, it might even be possible to remove the restrictions and perhaps allow a return to the standard coverage market.

Call us with your critical needs. We can probably help - and, of course, our conversations are strictly confidential!