Previously we discussed some initial considerations when shopping for appropriate professional liability insurance including the amount of coverage, eroding limits as opposed to claim expenses outside limits, the stability of the insurance company in the market, and availability of an extended reporting period for the claims made policy. In this article I will review some considerations regarding what a policy covers and does not cover. I will also look at important exclusions and considerations for other coverages.
An important consideration for any lawyers professional liability (also known as LPL) policy is how the policy defines a claim and what requirements the policy has for reporting claims and potential claims. Policies most often require “prompt” or “immediate” reporting of claims or use other language designed to encourage reporting as soon as a claim is known to the insured. Courts generally hold that insureds are required to provide notice in a reasonable time under the circumstances. The “claims made” element of LPL coverages generally requires reporting of a claim within the policy period. Most LPL policies will explicitly state that they are “claims made and reported policies.” This means that in order to have coverage, the claim must both be made and reported within the policy period.