They call it “going bare,” but it’s not what you do in the bathtub.
Instead, it’s what the legal profession calls a lawyer who practices without professional liability insurance coverage.
Sounds risky, right?
There’s another bit of risky business that some lawyers engage in: going without “tail” coverage. Alarmingly, this is often seen among lawyers in retirement.
Tail coverage covers lawyers on claims filed against them well past the expiration of their policy period. This exposure is known “tail exposure,” because it trails the attorney after they’ve stopped working.
Unlike a car collision or burglary, in which a claim is made immediately, lawyers need “long-tail” professional liability coverage because the claims against them often come years after an alleged malpractice.
For a lawyer who’s struggling – and, sadly, there seem to be many of those today – whether to go bare is a matter of economics. However, we’re seeing plenty of successful lawyers who lose their tail coverage when they switch firms or retire.
The problem isn’t likely to go away soon, given the growing number of boomer-age attorneys retiring each year. At the same time, firms regularly disband or are sold, while attorneys often jump from firm to firm. Each of those events can leave an attorney with what could easily end up as costly exposure.
Typically, law firms purchase tail coverage for claims made against the firm based on acts or omissions that occurred before an attorney left the firm. Attorneys aren’t always covered individually, so some opt to buy tail coverage on their own just as a precaution.
The fact is, however, that lawyers taking down their shingle can get tail coverage for life at no cost. Too many attorneys misunderstand this and, consequently, fail to take the steps required to qualify for free tail coverage.
There are generally three things that need to happen:
- First, the lawyer needs to be 55 and fully retired. Acting in an “of counsel” role disqualifies you, as does any kind of part-time lawyering.
- Secondly, a lawyer has had to have worked at the firm from which she or he is retiring for a minimum of three years to qualify for free tail coverage.
- Thirdly, the retiring attorney has only a limited amount to time to notify the insurance company of their retirement.
Free tail is also available for lawyers who can no longer work because of a disability and, as perhaps as the ultimate silver lining, in the event of death.
Finally, it’s important to understand that tail coverage, also known as Extended Reporting Period coverage, can be more complicated than a Supreme Court brief, with exclusions, exceptions and conditions galore, so reach out to us with any questions.
Diane Rothfuss is an account manager in CCIG’s lawyers’ insurance unit. Reach her at 720-212-2053 or at DianeR@thinkccig.com.