There’s a reason it’s called “Risk Management” and not “Risk Elimination.” You can’t eliminate risk completely… that’s why most attorneys buy Malpractice Insurance. There is a right way and a wrong way to buy professional insurance. It turns out how much insurance you buy and when you buy it is a lot more critical than it first appears.
Today, we want to take a fresh look at one way you can manage risk through judicious use of your malpractice policy and the policy limits it provides. It’s all about timing…
Bear with me a minute while I clarify; insurance companies keep detailed claim statistics that can be enlightening! For example, it should come as no surprise that there is a wide variance in “claim reporting patterns”. Reporting pattern is the time lag between when and attorney delivers a legal service to a client and when someone (usually the client) makes a claim alleging a professional mistake. Some types of legal services have (statistically speaking) shorter time lags, some longer… while some are very long.
Do you remember what cases you were handling 11 years ago? Because rest assured, they remember you!
Employment law, where you represent the employee, has a relatively short time lag of 1 – 2 years. Real-estate transactional law has a longer lag, coming it at 4-6 years. Now compare those with estates/trusts – this has a robust 8-11 years lag between legal service and claim made.
Those are only three examples of the 50+ “Areas of Practice” where claim reporting patterns are well documented over the last 40+ years (contact us if you would like specific information about your areas of practice). Knowing the “reporting pattern” for the type of law you practice can help you become a smart insurance buyer.
Why This is Important:
Remember, all policies from all insurance companies are “claims made” policies. That means it is the policy limits in force at the time a claim is made that protect you, not those you were carrying at the time you delivered the legal service. This is something to consider seriously as you purchase your policy limits each year at policy renewal time. Ask yourself: “What did I do in the past (and when in the past) that has a statistical likelihood of becoming a claim in the upcoming policy year?” Most attorneys still buy their insurance while thinking about the type of legal services they will be providing in the upcoming policy year. In fact, the amount of insurance you buy should be a consideration of the type of cases or legal services you delivered in the past! With a little planning, you can protect your future from your own past.
The ABA and insurers keep track of claims details like “reporting patterns”. This information can help you make a better decision of what policy limits are a good fit for your practice. Here at Mainstreet, we’d be happy to assist you with this analysis as well. It’s another part of our commitment to your security.