The Why and How of Tail Coverage for Legal Malpractice Insurance
Lawyers and their law firms may have a firm grasp on the importance of malpractice coverage for liability protection during their careers. However, a lawyer’s malpractice risk equally extends well beyond their last day of practice. In these scenarios, tail coverage is the insurance policy term that may defend an attorney against claims from former clients. Understanding how tail coverage applies to your malpractice policy may provide you with greater peace of mind to fully enjoy life after the practice of law.
What Is Tail Coverage?
Tail coverage is an extension of a claims-made policy term that allows a policyholder to make a claim for events that happened while the policy existed but reported after its termination. This special component of insurance may also be referred to as an extended reporting endorsement. The term length for tail coverage can be unlimited or range between 1 to 5 years depending on the policy.
Most legal malpractice insurance are claims-made policies, which makes tail coverage an important consideration. To receive coverage from a claims-made policy, the policy must generally be active both when the covered event occurs and
when the insured reports it to the insurer. The narrow applicability of claims-made policies can be a concern for insured firms and individuals when a policy terminates. Tail coverage is a policy feature that addresses this issue.
Why Do Lawyers Need Tail Coverage?
Lawyers need tail coverage for one simple reason – mitigating the risk of exposure from malpractice claims
that arise from past conduct.
The legal practice tends to have a natural latency between the timing of malpractice conduct and when the harm occurs. Certainly, there are some exceptions (e.g., a missed filing deadline). However, in many cases, a claimant won’t realize an attorney’s malpractice until years later.
The possibility for latent malpractice claims exists regardless of an attorney’s substantive practice area or skill set (e.g., litigation, transactional, etc.). Common malpractice events that might not become apparent until well after the fact may include:
- Drafting errors that lead to legal conflict or diverge from the client’s interests
- Missed filing or reporting that causes noncompliance with state agencies or other regulatory bodies
- Advice that fails to properly warn clients of future risk or liability
To help illustrate this point, you might think of the career of an attorney who practices trust and estate law
. The attorney helps a wealthy couple create an estate plan but fails to properly advise the client on related estate tax issues. As a result, the client doesn’t take any steps to reduce estate tax liability through gifting or credit shelter trusts.
The client (or the estate in this case) won’t realize the potential malpractice until after the couple’s death
, which might be years or decades after the attorney’s representation ended. If for some reason, the attorney no longer has an active malpractice policy (or lacks tail coverage), he or she may risk personal liability for that past malpractice.
What Are The Different Forms of Tail Coverage?
Tail coverage for lawyers comes in many forms depending on the insurance provider, jurisdiction, and other factors. Generally, insurance providers offer tail coverage in two forms – for individual attorneys and for firms.
Tail coverage for an individual attorney is designed to protect the covered person from liability for their past actions. Individual tail coverage is helpful for attorneys who cancel or do not renew their malpractice policy because they retire or otherwise leave the practice of law. This type of coverage may also help protect an attorney’s estate and family from malpractice claims that may arise after death.
In contrast, tail coverage for a firm may protect against past malpractice from its attorneys, staff, contractors, and other parties included within the terms of a specific policy. Firms – whether a solo practice or mid-sized – may benefit from tail coverage following different events:
- Death or disability of key members
- Other events where the firm or its member attorneys cease to practice.
Policy Limit Reinstatements Can Help Protect the Effectiveness of Tail Coverage
Legal malpractice policies generally have policy limits, which set the overall amount that a policy will payout for claims during the policy period. The timing of reported claims can become problematic for insured firms and attorneys who may have several claims in a year that arise from different periods and exceed the aggregate policy limit.
To hedge against that risk, some policies will have reinstatement terms. These terms allow insured firms to repurchase the policy limit and extend coverage after claims exceed the initial policy total. This feature becomes important for tail coverage holders to realize the benefit of the extended reporting period.
Tail Coverage through Aon Attorneys Advantage
Reviewing and understanding tail coverage within a malpractice policy should be at the top of every firm and attorney’s checklist during critical stages of a career. Aon Attorneys Advantage
is proud to offer qualifying insureds with the following features through its malpractice policies:
- A free non-practicing individual tail for attorneys who retire or stop legal practice (pending eligibility)
- Policy limit reinstatement terms
Aon Attorneys Advantage specializes in affordable malpractice insurance for law firms with 1 to 25 attorneys. Our advisors are available to answer questions or you can also use our online platform to receive a malpractice insurance quote within a few minutes and request other business insurance quotes.
Contact Aon Attorneys Advantage to get a quote or renew a legal malpractice insurance policy or supplemental tail coverage.
This information is provided for general informational purposes only and is not intended to provide individualized advice. All descriptions, summaries or highlights of coverage are for general informational purposes only and do not amend, alter or modify the actual terms or conditions of any insurance policy. Coverage is governed only by the terms and conditions of the relevant policy.