Errors & Omissions

Paul Finestone : October 31, 2016 11:30 AM : Blog

Attorneys’ license location does make a big difference!

When completing your applications for Lawyers’ Errors and Omissions Insurance pay close attention to the location of the licenses.  If, for example, you are in California and you have firm whose members are licensed in New York and Arizona, and not in California, this can dramatically impact your pricing.  If your work is based in San Francisco and Los Angeles, your Attorneys are not “Attorneys” necessarily in California and may be considered as highly trained paralegal staff depending on what they are doing for you.

Given that most carriers rate by the number of Attorneys and modify by practice areas, litigation intensity, nature of exposure, number of general support staff and systems & process, this can make a very meaningful difference in premium charges.  Most firms are very happy to take a premium reduction where justified by the facts.

Where you have a situation similar to this please do discuss this with us in detail as we may be able to make some real pricing adjustments while negotiating with underwriters.  Each case is different, but this is always worth a look.

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Errors & Omissions

Paul Finestone : October 28, 2016 2:00 PM : Blog

Claims Made Insurance Policies

When it comes to higher hazard insurance in both Commercial General Liability and Professional Errors & Omissions liability, the Insurance Companies have learned their lessons.  From both the costs of General Liability defense of tobacco companies and asbestos companies, the “long tail” of exposure has broken and bankrupted major corporations.  It has also seriously depleted insurance companies’ coffers and led to decades of expensive and predatory litigation.  This was the legacy of the “occurrence” form of coverage.  Whatever happened during the policy and became apparent, even many decades afterwards, was covered by those policies.

The result of that compound coverage exposure?  “Claims Made” coverage forms.  These polices do not offer occurrence coverage without limit.  They offer coverage only during the policy term and up to 30 days past expiry date.  You either lose coverage for that policy year if you do not renew, or you have to buy an extended reporting provision for your policy.

Most extended policy reporting provisions will only provide you with one, two or three years of “tail” coverage at 100%, 250% or 350% of the annual premium.  That figure will vary by insurance company but is ballpark accurate.  The “extended reporting provision” does not continue coverage, or increase coverage with “stacked” annual limits.  The reporting provision simply extends the period of time that a claim may be reported under the original policies coverage limit, terms and conditions.

That claims made policy may provide coverage for only that single policy year, or, in the case of a policy that was in force for multiple years may extend back to the beginning of the original policy which would be defined by its “retroactive date”.  The “retroactive date” is typically the date on which the first professional policy was issued, and is normally referenced directly on the declarations pages of a policy.  Sometimes referred to as a “prior acts date” the retroactive date limits any claims being reported prior to that stated date.  Even if the claim is reported during a current policy period if the acts which lead to the allegation of negligence or error & omissions occurred prior that date it is fully excluded from all coverage or defense under the policy.

Just to make things a little more complicated, Insurance Companies also refer to a term known as the “knowledge date”.  This phrase can eliminate coverage under a professional liability policy for any claim or situation that could lead to a claim under a new policy even if the claim is within a current period and the retroactive date.  The purpose of “knowledge date” wordings is to prevent a new insurance company under your existing program from inheriting a claim that should have been reported to the prior carrier on your program.  That would also have affected your eligibility for the new coverage that you may have secured.

If you had knowledge of a pending claim or incident prior to switching to a new carrier this could nullify your coverage.  This is why caution needs to exercised when switching carriers to make sure that there is nothing that needs to be addressed under the existing coverage.

While this may seem confusing, we can walk you through this and all the other issues of professional liability insurance.

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2017 Workers Compensation Updates

Paul Finestone : October 28, 2016 12:33 PM : Blog

For our California Employers, effective January 1, 2017 California Assembly Bill 2883 goes into effect, which changes California’s workers’ compensation law regarding exemptions from the law by corporate officers and directors, partners, and limited liability company (“LLC”) members.

In keeping with both the past practices and current developments Owners, Officers, and Managing Members getting both dividend and wage compensation will be required to make an election to be covered, or be excluded under workers compensation policies.

Specifically, officers and directors of quasi-public and private corporations who provide actual services to the corporation for pay are considered an “employee” of the corporation unless they elect to be excluded from coverage. See Cal. Lab. Code § 3351(c) (Eff. Jan. 1, 2017). However, now the officer or director can only elect to be excluded from coverage “if he or she owns at least 15 percent of the issued and outstanding stock of the corporation and executes a written waiver of his or her rights under this chapter stating under penalty of perjury that the person is a qualifying officer or director.” Cal. Lab. Code § 3352(p) (Eff. Jan. 1, 2017).

Also, working partners and LLC members who receive wages irrespective of profits are now considered employees, unless they exempt themselves from coverage. Cal. Lab. Code § 3351(f).

General partners and LLC managing members may, under penalty of perjury, execute a written waiver of their rights under the California workers’ compensation laws. Cal. Lab. Code § 3352(q).

Please note that if any of our clients have any officers, directors, LLC managing members or general partners who were exempt from California workers’ compensation coverage prior to the January 1, 2017 law change, they must submit a new signed exclusion / waiver form to the carrier in order to continue that exemption, provided that they meet the qualifying requirements. This applies to in-force policies and renewals.

So, there you are, more of the same and additional paperwork.

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Claims Handling With Heart

Paul Finestone : August 4, 2015 6:58 PM : Blog

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Paul Finestone : August 10, 2012 2:49 PM : Blog
  1. The named insured does matter and whoever is named first on your policy will control all transactions with the Insurance Company and will get the claims checks.  If you have a roommate or other person living with you other than a legal spouse and children they are not covered on your policy because they split the Apartment costs with you.  If they are not specifically named on the policy, they are NOT covered.
  2. While we are on the topic of roommates or mates in general you need to know that Insurance Companies try very hard to not get involved in messy breakups and fights.  If that significant other has a tantrum and smashes every picture of you in the house by throwing it into the big screen TV, or moves out and takes half the furniture which belongs to you that is not a theft –they are in your home with your permission.  Theft or burglary implies signs of forcible entry as in a “break in”; not someone to whom you gave the keys.
  3. The contract is a limited contract, it does not cover everything or it would say “everything is covered” on one page.  Yes, you really want to read this contract.
  4. “Named Perils policies” or “Direct Physical Loss” policies are very specific in the intent of coverage.  Every policy contains Named Insured declarations pages, Coverage description, limitations of coverage statements and exclusions.  If you do not discuss coverage issues with your Agent he doesn’t know that you have one of the world’s great baseball card collections and cannot tell you that loss by theft of your $100,000 collection will only get paid $500 unless you have this scheduled specifically on you policy. You also need to buy enough coverage.
  5. Antiques, collectibles, furs, jewelry, fine arts, silverware, gold bullion, cash and similar articles are very limited on the basic policy form and if you have significant values of this you need property floaters to be added to your coverage.
  6. If you start to run an Online Business from your apartment, it is not automatically covered under your renter’s policy liability.  While some companies will issue a home business endorsement for you, many will not and this is something very material that should be reviewed with us before you “just do it”.  Also, the home business endorsement does not provide commercial trade risk or intellectual property or trademark infringement coverages.  If you are setting up websites from home it really is not “ok” to just borrow stuff after a web crawl; lawyers have a very, very good time spanking people who think “everything is free”.  Hint –it’s not.
  7. Flood is not water damage.  Flood is water breaking its natural boundaries and whether catastrophe driven (Hurricane, Earthquake, and Tsunami) or wind driven, a true flood is only covered by the National Flood Insurance Program –the one you see advertised on TV.  Personal Renters policies do not cover flood.  Your Renters’ policy does cover water damage which is sudden and accidental.  For example, a pipe bursts in the wall and water is spraying all over your clothes and your laptop –this is covered.  Water damage does not typically cover water which gets into the building because a window was left open or the roof has been and is leaking.  Water damage protection would cover you if the window was “blown out” by heavy winds in a thunderstorm or a large branch fell on the roof during a storm and punctured it.  Remember the “sudden and accidental” phrase and you can see where they are going.  However, if you have a leaking roof or similar not all is lost.  There is a very good chance that your Landlord will be held responsible for your damages.
  8. Most of our clients claim too little when they have a major loss such as an apartment fire.  It is really hard when you are in the middle of a disaster to remember everything you had.  Once you sign the proof of loss form on your claim with an agreed amount you cannot go back to the well later.  So, be prepared.  Use your camcorder or smart phone to shoot video of the entire place.  Open drawers, take things in and out, shoot the closets and the shoe rack, open the kitchen cabinets…you get the picture.  We will be happy to store photos or CD’s/ DVDs in your file in our office for you.
  9. Don’t forget to increase your liability coverage to at least $300,000 and preferably $500,000.  Typically this costs less than $35 annually.  You should as well make sure that when you get your Renters policy that you also get an Umbrella Liability quote for 1, 2 and 3 million dollars.  It is most likely the most valuable, least expensive insurance you can have with your home and auto policies.
  10. We have never, ever had a claim where our client called us up and complained that we had sold him too much insurance.  When you have a big claim it is because the world has just fallen on you.  Be realistic in setting the amount of coverage you purchase.  Buying a $25,000 policy when you have a $100,000 of property is going to come back to haunt you.  Make sure that you have replacement cost coverage, schedules if needed and a deductible you can live with.  Protecting yourself is surprisingly affordable when done correctly.

As always, we are happy to assist our clients and friends.  If you have any questions on this issue we would be glad to hear from you and we will respond to any issues you would like to review.

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