Ask the Underwriter: A lawyer is leaving my firm. What do I do about coverage?

In the words of Andy Williams, “It’s the most wonderful time of the year.” It’s also a time when we see an uptick in lawyers changing firms or striking out on their own. And with that comes the question, “What do I do about coverage?” 

For the firm with a lawyer departing, the firm’s policy will continue to cover the work the departing lawyer did on behalf of the firm during his or her time at the firm. This is referred to in the industry as “former member coverage.” The former member coverage will be available so long as the firm continues after the lawyer leaves, and the firm keeps a lawyers’ professional liability policy in place. 

For the firm our departing lawyer above joins, you can add the lawyer with prior acts coverage as we can do that going back as far as the date the lawyer first established continuous professional liability coverage. But keep in mind that you will be exposing your firm to potential claims arising from the lawyer’s work done before joining your firm. If you do not want that exposure, the other option is to add the lawyer to your firm’s policy as of the date he or she joins your firm and require the lawyer to purchase an extended claims reporting endorsement (“tail” coverage) if he or she is concerned about the exposure from the prior work. 

And for the lawyer leaving a firm and setting up his or her own practice, you have three options. You can rely on the former member coverage referenced above and purchase your own policy to cover you from the start of the new firm going forward. But be aware that the former member coverage would cease if the former firm were to dissolve or stop purchasing coverage. To make certain you have coverage for your prior work, in addition to purchasing the policy for your new firm, you could purchase the extended claims reporting endorsement from your old firm’s carrier within the timeframe prescribed in policy or the carrier’s underwriting guidelines. However, the more cost-effective option would be to purchase prior acts coverage on your new policy.  The new policy can be written with prior acts coverage going back as far as you have maintained continuous coverage leaving you in control of your prior acts coverage and eliminating the need to purchase the extended claims reporting endorsement. 

If you have further questions about this topic or other underwriting questions, please feel free to call or email me. I wish you all a Merry Christmas and a happy holiday season!