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Insurance Applications Say More Than You Might Think

Mark Bassingthwaighte, Esq.

 Underwriters tell me that many lawyers simply do not appreciate the importance of a malpractice insurance application. They will see applications where, apparently, questions were hurriedly answered and thus limited information provided. At other times, they come across applications that are sloppy and incomplete. In these situations, it would seem that the person or persons filling out the application gave little thought to providing information that might not have been asked for, but which could be significant to the underwriting process.

An insurance underwriter will review everything that a law firm provides in its application. Certainly, a great deal can be learned about a firm from the specific information provided. However, the way a firm treats the application process may tell an underwriter even more. When a firm has had its renewal application for 90 days but ends up not returning it until just before the renewal deadline, what does that tell the underwriter about how the firm's lawyers treat critical deadlines associated with client files? When the underwriter calls to obtain additional information from the firm and the phone calls are not returned, or not promptly returned, what does that say about the firm's practice of returning phone calls to clients? A file that is dotted with an underwriter's repeated requests to the firm for additional information, which is eventually provided in a shoddy fashion, says volumes to an underwriter. What might all of these situations say to an underwriter about workloads at the firm? What does a sloppy or incomplete application say about a firm's attention to detail in and quality control of client files? These are significant issues to a malpractice insurance underwriter as they relate to the overall risk exposure of a firm. Impressions count with insurance carriers, just as they do with clients.

It is imperative that you thoroughly answer all the questions in an insurance application. Explain the firm's unique situations and/or relationships. Make sure your application and accompanying documentation is consistent or explain the inconsistency. For example, if your application indicates that you have three partners and two associates, but your letterhead indicates that you have five attorneys and two of-counsel attorneys, explain the discrepancy. If an answer to a question requires further explanation, provide a thorough response, so that any concerns the underwriter might have will be alleviated. Try to submit the application 45 days prior to the requested coverage date. And yes, neatness counts. Most insurers prefer typed applications simply because handwritten forms are often difficult, if not, impossible to read.

One of the benefits of providing thorough answers in the insurance application comes from taking advantage of the opportunity to explain all the loss prevention measures a firm has taken. Far too often, this information is missing from insurance applications and, in particular, from claims supplements. Malpractice insurance carriers want to know the frequency with which a firm uses letters and/or other writings to confirm the existence, non-existence or end of an attorney-client relationship. Effective calendaring and docket control systems are just as important. In fact, firms that handle a significant amount of litigation should maintain three independent calendar/docket control systems. The presence of a rules-based calendaring system would be even better. If such systems are in place, report this in some detail in your application.

Malpractice insurance carriers also want to know what steps the firm has taken to prevent the reoccurrence of a claim similar to the one reported on the claims supplement. Glib responses such as "that attorney is no longer working here" or responses which indicate that the firm has not accepted any responsibility for the claim are not convincing.

Most attorneys are well aware of the fact that malpractice insurance carriers respond negatively to firms that routinely sue for fees. Fee suits increase a firm's exposure to malpractice counterclaims. If your firm files fee suits several times a year, redesign your billing and collection practices and tell us how the new procedures will minimize the need to sue for fees in future.

Conflict of interest claims are also a concern. Underwriters are less receptive to firms that rely on "memory-based" conflict systems. The preference is to underwrite firms that utilize a computerized system that checks for possible conflicts when a prospective client first makes contact with a firm. If your firm uses a case management software system that includes a conflict-checking module, be sure to say so on the insurance application.

Finally, insurers prefer underwriting firms that take efforts to ensure that their attorneys do not dabble in cases that are outside of their individually defined practice profiles. From a malpractice insurer's perspective, there is no such thing as a simple will, simple contract or quick settlement. To a malpractice insurance carrier, such situations represent a malpractice claim waiting to happen.

Late applications, sloppy applications and hastily completed applications are all examples of situations where relevant information has been provided, albeit unintentionally, to malpractice insurance carriers. This information can and will have an impact on the underwriter's decision-making process. Not only will it affect the decision of whether or not to underwrite a firm, but it may also affect the determination of premium amount. When it comes to insuring a risk, the more information an underwriter has, the better able the underwriter is to understand and correctly rate the risk. The time taken to complete thoroughly and diligently your malpractice insurance application will be time well spent.

To Your Health

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A Brush with Honest Abe

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