Lowering your professional liability premium: How to correctly answer the four critical application questions.

As the managing or administrative partner, you have the annual, painful task of completing the lengthy professional liability application.  There are 30-100 poorly worded questions (10-20 pages) depending on which supplements are applicable to your practice areas.  Although there can be other landmines, particularly in the supplements, there are four questions that have the largest impact on premiums and what terms are offered.

1)      List of Attorneys – While appearing like the simplest question, the attorney roster can have a significant impact on your premiums.  It is in your best interest to provide the number of hours per week that each attorney is working for the firm.  Particularly with Of Counsels, or semi-retired partners, your broker can negotiate discounts for any lawyer that works less than 40 hours per week (full time) for the firm.

2)      The Areas of Practice Grid – It is critical that a partner spend some time on this section to break down the firm’s areas of practice.  We often see costly errors by non-legal administrative personnel due to their lack of legal knowledge.  The partner should work with their broker to go through this section carefully as each insurance company has their own definitions of the different sections and subsections.

3)      Avoid the All or None trap – There are several questions on the application that ask questions that contain the phrase Always or Never such as “Do you always send non-engagement letters”.  Despite the appearance of these questions only being answerable with checkbox answers (yes or no), on these important risk management questions, you must write a complete answer on the application or more details via an attachment to the application.  Some of the risk management questions to be careful about are those that ask about suing for fees, procedures, and client intake.

4)      Claims – Don’t attach the papers!  While tempting to do so for convenience, attaching suit papers will not elicit the best terms from insurers.  There are three parts of information that you should contain in your claims supplement: Loss reserves, what happened from your perspective and most importantly, what changes if any, were made at the firm to preclude a recurrence of the same types of claims.

The completed application is the “face of the firm” in the marketplace.  A well done application is a critical first step in obtaining the best terms available for your firm.  Your broker should preview the application with you and review your completed application.  With this solid basis, you are ready to shop for your coverage.

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