Lawyers Professional Liability Insurance is Provided on a Claims Made and Reported Basis
An LPLI policy is quite different than the more traditional insurance policy that you may purchase for your home, auto, or even health. These more traditional policies are provided on an “occurrence” basis while LPLI insurance is provided on a “claims made and reported” basis which is standard in professional liability insurance. The fundamental difference is the event that “triggers coverage” under the policy. In a more traditional home or auto policy, for example, coverage is triggered when a covered event such as damage to your home or an auto accident “occurs” during the policy period, without regard to when the covered event is reported to the insurer so long as the insurer is not prejudiced from a late reporting of the covered event.
The event from which a claim arises under a Lawyers Professional Liability Insurance policy is generally an act, error, or omission in Professional Services. This is commonly referred to as a “Wrongful Act” in an LPLI policy. In contrast to an “occurrence” based policy, the occurrence of a Wrongful Act during the policy period is not the event that triggers coverage under an LPLI policy. Instead, coverage is triggered under an LPLI policy only when a covered claim that arises from a covered Wrongful Act is “first made against the Insured and first reported to the Insurer” during the policy period. This is true even if the covered Wrongful Act did not occur during the policy period, so long as the covered Wrongful Act occurred on or after the Retroactive Coverage Date specified in the policy. This distinction is critically important because most mistakes that a lawyer makes in the practice of law are not discovered immediately and most claims against a lawyer for legal malpractice are not made against a lawyer until well after the actual mistake or error is made.