Nuts and Bolts: Understanding the Parts of Your Policy
Insurance is what we do. We live and breathe it, so we understand it. However, like lawyers talking to nonlawyers, sometimes it’s easy to forget not everyone knows the terms and phrases associated with our industry. To be sure you understand your policy, we’ve broken down its parts as well as some of the most common insurance terminology for which we receive questions.
As always, if you have questions about your policy, your coverage or anything we can help with, please contact us.
Anatomy of Your Policy
Although every policy is unique, as it’s tailored to each firm’s needs, the parts that make up the document are fairly standard. Each section of your policy is detailed below with a brief description.
- Payment Schedule
If you pay your premium in full, you will not have this section. For financed policies, this schedule indicates when payments are due and their amounts.
- Declarations Page
This page is an overview of all your policy’s details like policy number, name of the insured, policy period and limits.
- Named Insured
Your policy is issued to the law firm as a whole, and this section lists every licensed attorney associated/affiliated with the firm as covered by the policy. This is primarily due to the potential vicarious liability or partnership by estoppel created from the existence of a firm. All nonlawyer employees are also covered for work related to legal services provided (unless they are listed in the policy exclusion list), as their work is viewed as assistance to the legal work provided by the attorneys in the firm and are ultimately their responsibility.
- Prior Acts Date Endorsement
This section lists the dates to which coverage is applied for every named insured, as well as the limits that apply to those dates. You can read more about prior acts and how it can affect coverage here.
- Policy Limit and Deductible Change Endorsement
If you have changed your limits or deductible, this section would detail out any of those changes.
- Employment Practices Liability (EPL) Endorsement
This section details out your EPL coverage. EPL coverage is automatically quoted with your lawyers professional liability unless you opt out on your application. The cost is only $100 per attorney and includes a fairly broad array of exposures arising from the employment process. Most common among these are: discrimination, failure to promote, wrongful termination, harassment and disability rights. You can read more about EPL here.
- Cyber Liability and Breach Response Endorsement
Every lawyers professional liability policy we write includes cyber coverage with base limits at no additional cost to policyholders. Limits may also be increased to provide even more protection against cyber threats should you choose. The details of your coverage are listed in this section. You can read more about your coverage on our Cyber Liability page.
- Other endorsements
Other endorsements – including adding or removing an attorney to the policy, title agent endorsement E&O, firm name change, policy cancellation or others – are listed on their respective pages with their details. These are optional endorsements so unless there is an endorsement requested by the firm, it will not be part of your policy and therefor not in your policy documentation.
- Outside Employment or Company Ownership Exclusions
Like those listed under Other Endorsements above, this endorsement is not on every policy, however it is common enough that we wanted to include an explanation. If any attorney is employed by an entity other than the firm, there can be an exclusion for any work done on behalf of that firm. Additionally, if any attorney has ownership of an entity other than the firm, work done for that entity can be excluded. These exclusions can exist due to the conflict of interest that could occur.
- Privacy Statement
We include a privacy statement with every policy to help our policyholders better understand what information we collect and how it’s used and stored
Although this isn’t an exhaustive list of uncommon phrases included in your policy, we’ve tried to highlight some for which we receive the most questions. If there are still parts of your policy you do not understand, please contact us.
- Claims Expense
This amount is the allotted allowance for defense costs and is in addition to the limits of liability listed on the Declarations Page. After claims expense allowance is exhausted, claims expense reduces the limits of liability.
- Claims-Made Policy
In order for an incident to be covered under a claims-made policy, two things must be true: You need to have insurance when the claim is made and your prior acts date contained in your policy must be on or before the date the incident occurred. The insurance policy in effect when the claim is made is the one that actually responds to the claim, hence the name claims-made. Because there are two factors involved in determining if a claim is covered, continuity of insurance is very important for claims-made policies. See a full explanation of how a claims-made policy works here, including a helpful video.
This is the amount for which a policyholder is responsible in the event of a claim before the limits of liability can be applied.
An endorsement is a change to your insurance policy that adjusts your coverage. These can be changes to your lawyers professional liability policy – like adding or removing a lawyer or a change in your limits – or they can be changes to supplementary coverage – like an increase of your cyber coverage or adding EPL. Endorsements may be made at any time during the policy period.
- Experience Discount
Your claims experience is best explained as your history of claims, or lack thereof. Like other lines of insurance such as auto or homeowners, the number of claims and their individual circumstances can affect your premium.
- Limits of Liability and Split Limits
Your limits are the amount for which you are covered. Professional liability is written with split limits, meaning there is an amount of coverage each individual claim may not exceed as well as an aggregate amount of coverage all claims within a policy period may not exceed. You can read more about split limits here.
- Policy Period
This is the period of time for which the policy is providing coverage. Policies are issued for a 12-month period, regardless of when in a calendar year they are issued. Endorsements made mid-policy period are in effect only for the remainder of the policy period (e.g., an endorsement adding a lawyer to a policy on the sixth month of the policy period does not extend the coverage of said lawyer beyond the policy’s stated period).
The premium is the annual cost of the policy to the policyholder.
- Rates or Rating
Your premium is determined by several factors, and the process by which they are determined is called rating. Rates, however, are just the individual prices for those factors – which, when calculated together, provide the underwriter with your premium.
- Step Rate
Every attorney new to OAMIC coverage enters as a step 1, and moves up one step annually for the first 7 years, until they reach step 7. Your step rate is not a reflection of the number of years you’ve been in practice, only how many years of prior acts are being covered. When an attorney begins coverage with OAMIC, their exposure is less because the work OAMIC insures has just started. We pass along that reduced risk by giving you a discount on your premium. This discounts is called a “step rate credit.” Learn more about step rates here.
An underwriter is the licensed professional who rates, approves and issues your policy to you.