1. Who is Aon?
Aon Corporation is the second largest insurance broker and the largest provider of professional liability insurance for attorneys in the world. Aon Corporation has over 47,000 employees working in more than 500 offices in 120 countries. The Affinity Insurance Services, Aon Direct Insurance Administrators and Affinity Insurance Agency of New England, Inc. offices are all a part of Aon Services Group. These Aon offices provide a selection of insurance products to attorneys through the Aon Attorneys' Advantage program.
2. What is the difference between a "hard" insurance market and a "soft" insurance market?
The insurance industry is cyclical in nature. "Hard" markets tend to run 3- 5 years. Typical signs of a hard market include:
- Carriers leave the marketplace; coverage becomes more difficult to obtain.
- Stricter underwriting guidelines: there are more declinations, less tolerance of areas of practice; caps on limits of liability and increases in deductible are common.
- Additional exclusions or reductions in coverage.
- Dramatic rate increases.
"Soft" market cycles tend to run 5-7 years. Typical signs of a soft market include:
- Excessive competition by insurance carriers. New carriers enter the market and try to gain market share with an increased willingness to accept more significant risk.
- More liberal underwriting guidelines. Because carriers are looking for market share, they broaden their guidelines in order to consider risks that have more hazardous practice, a greater frequency of claims or a higher claim payout threshold.
- Additional coverage options become available. Options such as defense costs outside the limits of liability, first dollar defense deductibles, multi-year contracts and rate guarantees return. Special endorsements catering to a particular firm's needs are easier to negotiate.
- Prices drop as carriers underbid each other for business.
3. What is a "conflict of interest" or "outside interest" and why is it important to the underwriters?
Underwriters generally ask if you sit on the board of directors or hold any equity interest in any businesses other than the firm. They are interested in whether these entities are clients of the firm, if the entities are non-profit or for profit, the position you hold and the amount of equity interest held by you, the rest of your firm and family members. They also want to know the percentage of your firm's gross billings that is derived from these organizations. It may be perceived that legal advice given to such a client may not be as objective as it should be. Claims alleging conflict of interest tend to shift the burden of proof to the defendant and often cloud other pertinent issues. The jury may automatically assume that the lawyer acted in his or her own self-interest. It can affect your premium and/or exclusion for that entity may apply.
4. What are the definitions of "prior acts coverage", "retroactive date" and "full prior acts coverage"?
Prior acts coverage refers to coverage for acts, errors or omissions that occurred prior to the policy's inception date.
The retroactive date, also known as prior acts exclusion date, is the earliest date that an act, error or omission may occur which will be covered by the policy if a claim is subsequently made.
Full prior acts coverage means that there is no retroactive date on the policy. The insured is covered for all acts, errors or omissions giving rise to a claim, subject to all policy terms and conditions.
5. What is the definition of the claims-made policy?
A claims-made policy will respond if a claim is made against an insured and reported to the insurer during the policy period, subject to the policy's retroactive date, if any.
6. What are per claim and aggregate deductibles?
A per claim deductible is paid each and every time there is a claim. An aggregate deductible is the total deductible amount that can be paid in a policy year, regardless of how many claims are made.
7. Why are underwriters reviewing my website and how can that impact the underwriting of my professional liability application?
It is now common practice for underwriters to cross reference the way your firm is presented on your website with the information contained in your application. If you indicate that you do entertainment work on the web, but do not show it on your application area of practice, they will want clarification. Many applications are declined because of contradictory information.
8. What is the problem with sharing office space with other lawyers?
If it is not clear that you are not associated with other lawyers with whom you share office space it can be confusing to the clients that visit that office. If one of your office sharing colleagues does not carry insurance, but incurs a claim, a claimant could imply that this lawyer is a part of a de facto firm and sue the other entities in that space. In other words, such a relationship can create vicarious liability for all those in it. If you do share space, you should not share letterhead, files, clients, employees, advertising or signage. The phones should be answered either in the name of the individual lawyer or as "law offices". Office sharing lawyers that appear to be a de facto firm may be required by the underwriters to insure together on one policy to prevent uninsured vicarious liability.
9. What is an extended claim reporting period?
An extended claim reporting period (also known as "ECRP" - Extended Claims Reporting Period - or "Tail") is an endorsement that extends the claims reporting time under the policy. The act, error or omission giving rise to the claim must have occurred during the covered period of time under the policy for the ECRP to respond. The ECRP is recommended when a firm dissolves, an individual attorney retires from private practice, ceases practice, decides to self-insure or is uninsurable.
10. What can I do to present my firm in the best possible light (and reduce requests for additional information)?
- If you have experienced actual or potential claims present the details clearly and concisely. Be sure to provide accurate details and include your side of the story. If you have implemented measures to prevent a recurrence you should include such details.
- Strong, consistent internal systems and controls indicate that you are minimizing the potential for claims stemming from inadequate office procedures. Manage client expectations with engagement/disengagement procedures. Maintain a solid client intake and billing process. Establish conflict of interest detection and avoidance procedures. As a minimum, employ dual docket controls that are crosschecked by another person in your office on a regular basis. This is particularly critical if your practice areas are subject to statutes of limitation.
- Reduce high-risk areas of practice or cease them altogether. These include securities, plaintiff personal injury, class action or toxic tort cases, commercial real estate, entertainment, and intellectual property areas of practice. If you practice in these areas supply additional detail on how you effectively manage the increased risk.
- Provide underwriters with a complete and legible application.
- Be sure that the way you represent yourself in the application matches what is on your letterhead and website. Explain any differences.
- Provide good customer service and communication to your clients to reduce the likelihood of complaints to the Bar.
- Do not sue your clients for fees. They may countersue for malpractice.
11. What is CEOL versus CEIL?
CEOL means claims expenses are outside the limits of liability and won't erode the limits of liability. CEIL means claims expenses are included in the limits of liability.
Please Note: The information listed above is intended to provide general information and should not be construed to be statements of strict coverage. For actual claim situations please contact your claims administrator. While care has been taken to ensure that the FAQ information is accurate, such information cannot be interpreted as changing the scope of the insurance terms and conditions of the applicable policy contract in effect with any insured. A policy can only be changed by the underwriter through a change in coverage form, endorsement to the policy contract or amendment to the policyholder's certificate of insurance. The underwriting rules issued by the company may change from time to time, which may affect the questions and answers on this page.