You have practiced law for a while and now it is time to move to the next adventure in life. What will it be: an in-house counsel job, judicial work, government work, a non-legal career, or maybe even a well-deserved retirement?
You have heard talk in the past about claims-made polices, prior acts, and tails. But what do these really mean?
Professional liability insurance is offered on the “claims made” basis instead of the “occurrence” basis like automobile insurance. This means that the policy in effect at the time the claim is made (not at the time the act/omission occurs) – subject to certain limitations – is the policy that covers the loss.
The primary limitation is known as the “prior acts date” and is the date from which coverage is offered for acts/errors/omissions. This date is critical as anything that occurred giving rise to a claim before that date would not be covered under the policy.
The important item to note is that your policy is intended only for when you are engaged in the private practice of law for others. So what do you do now to keep coverage for your past practice?
An Extended Reporting Endorsement (“ERE” or “Tail Coverage”) is the way to go. It extends the time you have to report a claim under your existing policy, offering you protection for prior acts no matter where your next adventure leads you.
Also, there are circumstances when this coverage may be free!
You should refer to your insuring agreement to determine what duration of ERE’s are available to you as it is important to choose one that would offer sufficient coverage against future claims. For instance if a carrier only offers a 1, 2, or 3 year ERE, then you would potentially be vulnerable to a claim made against you after the ERE expires but that may still be within the applicable Statute of Limitations or the Statute of Repose periods.
Lawyers Mutual offers two ERE options in North Carolina: (1) an additional 4-year period of time to report claims (to correspond to the current Statute of Repose for legal malpractice in NC), or (2) an unlimited period of time to report claims. Note that while an ERE extends the time to report a claim under the last policy insuring you, it does not cover against acts/errors/omissions occurring after you were removed from that policy. The alleged act, error, or omission giving rise to the claim must have occurred between your prior acts date and the date the policy ended.
But be warned: there are time limits on when you are able to obtain an ERE, so if you are thinking about this, you should discuss your options well in advance. Please feel free to contact our Underwriting Department at 1-800-662-8843 for further information or with any questions about ERE’s.
About the Author
Patrick is the Vice President of Enterprise and Operational Risk Management at Lawyers Mutual as well as filling the roles of Corporate Secretary and Director of Information Security. He is an NCSB board certified specialist in Privacy & Information Security Law and has been designated a Fellow of Information Privacy and a Privacy Law Specialist by the IAPP. He is always happy to talk about his collection of tinfoil hats or to discuss risk management advice and resources that you may find helpful - you may reach him at 800.662.8843 or email@example.com.