Ask the Underwriter: How Do You Know if Tail Coverage Is Right for You?

Back in the August edition of ‘Ask the Underwriter,’ we went over prior acts coverage as part of our series on lawyers malpractice insurance basics. Prior acts coverage is established when you first purchase coverage, and it remains in place so long as you continue to maintain your coverage.

But if you retire or leave private practice, will those years of continuous coverage and the prior acts coverage it afforded continue to protect you? The answer is no.   

If you will think back to the first ‘Ask the Underwriter’ in this series, lawyers malpractice insurance is written on the claims-made form. Unlike the occurrence form which covers incidents that occur during the policy period without regard to when the claim is made, the claims-made form only coverage claims that are made and reported during the policy period. You must look to the current policy period for coverage, not prior policy periods. So, if you retire or leave private practice, and your policy ends, there is no current policy to look to for coverage. There is an exception to this for those in multi-lawyer firms. If you retire or leave a multi-lawyer firm, so long as the firm continues on after your departure, and the firm continues to maintain coverage, you should benefit from what is referred to as “former member coverage.” As a former member of the insured firm, you will continue to be covered for claims arising out of the work you did at the firm even after being removed from the firm’s policy. The former member coverage would cease should the firm dissolve or stop maintaining the policy. 

So, how do you protect yourself from claims that might arise after you retire or leave private practice? With Tail Coverage.

Tail coverage is the common reference for an Extend Claims Reporting Period Endorsement. This tail endorsement would be purchased and issued at the time of cancellation or the natural expiration of the underlying policy. And it extends the period of time you have to report claims that would have fallen within the coverage of your policy, i.e., claims arising from your professional services rendered on or after your prior acts date through the cancellation or expiration date of the underlying policy. The exclusions, terms, and conditions of the underlying policy apply to the coverage afforded by the tail endorsement as does the deductible. The purchase of the tail endorsement is a one-time purchase, and it must be purchased within the time period defined in the policy. If you have continuously maintained your coverage with AIM, you may be entitled to a free tail endorsement upon retirement from the practice of law. 

Tail coverage also might be needed when a firm is acquired by another firm, and the acquiring firm does not want to pick up the prior exposure of the acquired firm. In this situation, tail coverage may be necessary to provide protection for the acquire firm’s past acts.

If you have questions or if you are considering retirement, please contact me so we can discuss your options: ben@attorneysinsurancemutual.com.