Left to right: Randy Evans and Shari Klevens, Dentons partners
Left to right: Randy Evans and Shari Klevens, Dentons partners ()

California attorneys are required to inform their clients in writing if they do not have professional liability insurance, whether at the time of engagement or any time during the representation. Under Rule 3-410 of the Rules of Professional Conduct, any gap in coverage may trigger an attorney’s duty to disclose the lack of insurance to all clients.

When a legal malpractice insurer decides not to renew a policy, it can cause attorneys to feel panicked and even desperate for options. But in today’s market, there is little reason to panic. There are various opportunities for law practices and attorneys to obtain necessary coverage regardless of size, location, practice area, or claims history.

Many firms or attorneys will inquire with their insurer after that insurer has elected not to renew — the reasons for the decision may impact the next steps. For example, a nonrenewal might result when an insurer decides to leave the legal malpractice market. Other times, the law practice may have outgrown the parameters for the insurer’s portfolio, or the law practice may now include a specialty, such as securities or intellectual property, that the insurer does not cover.

In some situations, the frequency or severity of a law practice’s prior claims may be the source of the nonrenewal. While a single claim rarely triggers a nonrenewal, an insurer may discover during the adjustment of a single claim that the firm engages in practices that pose too much risk. These could include not having an effective docket control system, not using engagement letters, not having a conflict resolution process, handling matters outside the firm’s expertise, or commingling funds. In those instances, the combination of a prior claim and the firm’s risky practices may trigger a nonrenewal.

If a firm’s legal malpractice insurance is not renewed, here are some suggestions for the next steps.

Identify and Address High-Risk Areas

A decision of nonrenewal can feel scary at first, but it can also prompt the law firm or attorney to engage in reflection and self-review. The insured can consider whether it has policies or procedures that need updating, or even just ensure that it is comfortable with the procedures it already has in place.

If the reason for nonrenewal involves prior claims against the firm or the insurer’s concern regarding the firm’s practices, then corrective action may be beneficial. For example, if the insurer felt that the law practice was exposed to an extended statute of limitation for its failure to include limits in its engagement letters or for its failure to send file-closing letters, the law practice can use this time to decide whether it wants to amend its standard practices. Or, if the firm has accepted a matter outside the practice areas covered by the insurer, the firm can consider whether engaging in such matters merits exploring other insurers to obtain coverage.

After a nonrenewal, a law firm can use this time to make the upgrades to its systems and tools that it has been putting off. It may find that by making these improvements, it may be able to negotiate a better deal for premiums with its new insurer than it had with its old insurer.

Retain a Trusted Agent or Broker

The firm may consider starting from scratch by seeking a trusted broker to help the firm find a new insurer. A broker with a proven track record is invaluable to a law practice or attorney. A good broker often helps an attorney find the best program of insurance and navigates the marketplace for the best coverage from the best insurers at the best prices.

Brokers are primarily responsible for addressing law practices’ unique interests and needs with insurers. For firms facing unusual risks, brokers usually have the best recommendations for special insurers or programs.

Even after placement, brokers can help open the lines of communication with an insurer after an unfavorable or high-profile verdict against a practice. When this happens, brokers can use their business relationships with insurers to assist law practices in getting back on their feet and making sure that they remain covered.

Consider Insurers’ Expectations

Many brokers and insurers will share the kinds of risk management tools that they expect and prefer firms to use. These may be reflected in the application itself. Although no firm is “perfect,” some firms fall short in reviewing whether their practices conform with insurers’ expectations.

Recommendations from an insurer are typically grounded in experience, data, and results. Thus, before an insurer moves toward institutionalizing or recommending a risk management procedure, it often will have determined from the data that the procedure works and actually minimizes risk to law firms. Even if the law firm does not understand why the insurer encourages a specific practice or conduct, it is more likely than not that prior actual claims experience confirms that the procedure is beneficial.

Whether a recommendation is appropriate for a specific practice will depend on the applicable facts and circumstances; but usually such recommendations are at least worth considering.

Evaluate Alternative Insurers and Available Coverages

With an understanding of what insurers expect and how to navigate the market with a trusted broker, law firms can use a declination as a reason to take advantage of the wide programs currently available. Some advantages to finding a new insurer include fewer exclusions, greater limits, and additional coverages, such as cyber-attack, employment practices, or disciplinary proceedings.

On the other hand, there are significant risks attendant to changing insurers. The greatest risk is a gap in coverage between the expiring coverage and the new coverage, which may have a retroactive date. It is critical to know whether any gap might result.

Complete Policy Application Accurately

After gaps in coverage, the greatest risk with a new insurer (and a renewal insurer, too) is an inaccurate or incomplete application. Errors in the application can ultimately risk coverage for the entire law practice. As a result, applications demand special attention to ensure that they are complete and accurate. Misrepresenting facts in the insurance application, for example, can be the basis to deny coverage or later withdraw coverage when the law practice really needs it.

The good news is that submitting a thorough and accurate application, using a good broker, and exploring all of the options in today’s competitive marketplace can help relieve some of the stress associated with securing new legal malpractice insurance.

California attorneys are required to inform their clients in writing if they do not have professional liability insurance, whether at the time of engagement or any time during the representation. Under Rule 3-410 of the Rules of Professional Conduct, any gap in coverage may trigger an attorney’s duty to disclose the lack of insurance to all clients.

When a legal malpractice insurer decides not to renew a policy, it can cause attorneys to feel panicked and even desperate for options. But in today’s market, there is little reason to panic. There are various opportunities for law practices and attorneys to obtain necessary coverage regardless of size, location, practice area, or claims history.

Many firms or attorneys will inquire with their insurer after that insurer has elected not to renew — the reasons for the decision may impact the next steps. For example, a nonrenewal might result when an insurer decides to leave the legal malpractice market. Other times, the law practice may have outgrown the parameters for the insurer’s portfolio, or the law practice may now include a specialty, such as securities or intellectual property, that the insurer does not cover.

In some situations, the frequency or severity of a law practice’s prior claims may be the source of the nonrenewal. While a single claim rarely triggers a nonrenewal, an insurer may discover during the adjustment of a single claim that the firm engages in practices that pose too much risk. These could include not having an effective docket control system, not using engagement letters, not having a conflict resolution process, handling matters outside the firm’s expertise, or commingling funds. In those instances, the combination of a prior claim and the firm’s risky practices may trigger a nonrenewal.

If a firm’s legal malpractice insurance is not renewed, here are some suggestions for the next steps.

Identify and Address High-Risk Areas

A decision of nonrenewal can feel scary at first, but it can also prompt the law firm or attorney to engage in reflection and self-review. The insured can consider whether it has policies or procedures that need updating, or even just ensure that it is comfortable with the procedures it already has in place.

If the reason for nonrenewal involves prior claims against the firm or the insurer’s concern regarding the firm’s practices, then corrective action may be beneficial. For example, if the insurer felt that the law practice was exposed to an extended statute of limitation for its failure to include limits in its engagement letters or for its failure to send file-closing letters, the law practice can use this time to decide whether it wants to amend its standard practices. Or, if the firm has accepted a matter outside the practice areas covered by the insurer, the firm can consider whether engaging in such matters merits exploring other insurers to obtain coverage.

After a nonrenewal, a law firm can use this time to make the upgrades to its systems and tools that it has been putting off. It may find that by making these improvements, it may be able to negotiate a better deal for premiums with its new insurer than it had with its old insurer.

Retain a Trusted Agent or Broker

The firm may consider starting from scratch by seeking a trusted broker to help the firm find a new insurer. A broker with a proven track record is invaluable to a law practice or attorney. A good broker often helps an attorney find the best program of insurance and navigates the marketplace for the best coverage from the best insurers at the best prices.

Brokers are primarily responsible for addressing law practices’ unique interests and needs with insurers. For firms facing unusual risks, brokers usually have the best recommendations for special insurers or programs.

Even after placement, brokers can help open the lines of communication with an insurer after an unfavorable or high-profile verdict against a practice. When this happens, brokers can use their business relationships with insurers to assist law practices in getting back on their feet and making sure that they remain covered.

Consider Insurers’ Expectations

Many brokers and insurers will share the kinds of risk management tools that they expect and prefer firms to use. These may be reflected in the application itself. Although no firm is “perfect,” some firms fall short in reviewing whether their practices conform with insurers’ expectations.

Recommendations from an insurer are typically grounded in experience, data, and results. Thus, before an insurer moves toward institutionalizing or recommending a risk management procedure, it often will have determined from the data that the procedure works and actually minimizes risk to law firms. Even if the law firm does not understand why the insurer encourages a specific practice or conduct, it is more likely than not that prior actual claims experience confirms that the procedure is beneficial.

Whether a recommendation is appropriate for a specific practice will depend on the applicable facts and circumstances; but usually such recommendations are at least worth considering.

Evaluate Alternative Insurers and Available Coverages

With an understanding of what insurers expect and how to navigate the market with a trusted broker, law firms can use a declination as a reason to take advantage of the wide programs currently available. Some advantages to finding a new insurer include fewer exclusions, greater limits, and additional coverages, such as cyber-attack, employment practices, or disciplinary proceedings.

On the other hand, there are significant risks attendant to changing insurers. The greatest risk is a gap in coverage between the expiring coverage and the new coverage, which may have a retroactive date. It is critical to know whether any gap might result.

Complete Policy Application Accurately

After gaps in coverage, the greatest risk with a new insurer (and a renewal insurer, too) is an inaccurate or incomplete application. Errors in the application can ultimately risk coverage for the entire law practice. As a result, applications demand special attention to ensure that they are complete and accurate. Misrepresenting facts in the insurance application, for example, can be the basis to deny coverage or later withdraw coverage when the law practice really needs it.

The good news is that submitting a thorough and accurate application, using a good broker, and exploring all of the options in today’s competitive marketplace can help relieve some of the stress associated with securing new legal malpractice insurance.