Professional Liability Insurance Claim: Prevent Yours From Being Denied

If you think you might be sued for an act, error or omission in your work, be sure to promptly inform your professional liability insurance carrier. Reporting requirements have become more stringent. Potential claims and circumstances should be noted when first discovered, not just when they become actual claims. Failure to report in the timeline specified — especially before policy renewal — increases the chance of forfeited coverage. Assuming a long-term relationship with the same insurance company will protect you can lead to trouble.

When to report a potential claim

As soon as an error is discovered it should be reported to your liability insurance company.  Even when your client tells you that he has “no intention of suing,” they may change their mind. A client made that initial comment and later sued the company and a Pennsylvania court ruled the statement “neither foretold nor foreclosed a future malpractice suit by the client.” Based upon the attorney’s mishandling of the client’s case, awareness of a potential claim existed and should have been reported to his insurance carrier.

What if your client approaches a state disciplinary body?

A client’s complaint of mishandling to a state grievance committee may result in a stern criticism, particularly if no earlier complaints have been filed against you. Yet when no formal disciplinary action is taken by a grievance committee, you still can be accused of a professional wrongdoing later through a claim. Disciplinary proceedings must be disclosed promptly to avoid a claim denial due to late reporting.

What if the mistake can be corrected?

Don’t play Russian roulette with your professional liability insurance coverage. You may think the situation will “go away” because of a correction made, the previous relationship was solid, or because the client continues to use your services. Put simply, if you know that a mistake has been made, report it.  Don’t get comfortable with prolonging the reporting measures, get in the habit of reporting concurrently.

Issues regarding insurance renewals

When renewing coverage, you’ll undoubtedly be asked about awareness of any incidents or circumstances that could result in claims or disciplinary action. Be upfront because not disclosing such information could result in a later claim denial.  Even if it was a pretty rough year disclose everything in order to decrease the chances of having a claim denied.

Act Responsibly

Know what requirements are stated by your professional liability insurance carrier regarding reporting of claims, circumstances and disciplinary actions. Then, talk with your insurer and broker about how to report such matters, including the time frame and necessary documentation. Your insurance company is there to dispute the merits of unfounded allegations or wrongdoings, but it’s your responsibility to follow their reporting procedures and timelines.

Resources

PLUS Journal, July, 2015. Recent Cases Interpreting Notice Provisions in Legal Malpractice Insurance Policies as to Potential Claims