ALPS In Brief Podcast-Episode 2: Insurance as an Investment, Not Just a Line Item

Mark sits down with Julie Patterson, a longtime ALPS Business Development Representative, bringing with her two decades of experience helping law firms across the country understand the importance of selecting the right coverage to protect their law firms. In this episode Mark and Julie discuss legal malpractice insurance costs in terms of what a firm should actually be getting for their premium dollar.

ALPS In Brief, The ALPS Risk Management Podcast, is hosted by ALPS Risk Manager, Mark Bassingthwaighte.

Transcript:

MARK:

Welcome to another episode of ALPS In Brief, The ALPS Risk Management Podcast. I’m Mark Bassingthwaighte, ALPS risk manager, and I’m sitting down today at the ALPS offices in Missoula, Montana, with JULIE. Julie has been with ALPS on the business development team for 20 years. She brings with her a wealth of knowledge on legal malpractice insurance, and today we are going to talk about the cost of legal malpractice insurance, focusing on what really should you be getting for your premium dollar. Julie, welcome.

JULIE:

Thank you, Mark. I appreciate that nice intro.

MARK:

Well, you’re very welcome. You’re very welcome. I think it’s a fair question. Malpractice insurance is … It’s an investment. It’s not an insignificant line item of business year to year. When I think about I’m cutting this check each year and buying my ALPS policy, really what am I getting, what should I be getting when I think about malpractice insurance?

JULIE:

Good question. It’s very important for your firm to have your malpractice insurance carrier picked out and go through their features with a reputable person at the company to help you out with everything. You want to look for somebody who is going to partner with you, who’s going to understand what you do in the course of your day-to-day business and be able to provide support where you need it, but also peace of mind for exactly what you’re buying for your firm.

MARK:

I think that’s a great point in the sense … Heaven forbid, if I have some significant claim come up at some time, I mean, I really am counting on the carrier to have my back. What I’m hearing is the relationship here I really should look into.

JULIE:

You should.

MARK:

That this is a partner.

JULIE:

It is, and that’s very important because you want to have access to the people when you need to talk to them, or if you have a claim in your firm, you need to be able to talk to that person who can help you, ease your mind, and get the ball rolling for you.

MARK:

Are there other things that come to mind?

JULIE:

Absolutely. You want to look at the policy features. You want to see what they offer in limits and deductible. You want to access your clientele and your risk and what you can sleep with at night for your limits and deductible. That’s an important factor as well.

MARK:

In policy features, there’s one thing I think that’s important and I’m not sure everyone fully appreciates at times. You can sit down and compare policies at times and everything seems to be exactly the same except one is significantly cheaper. What we’re really getting at is there’s some policies out there that are what we refer to as cannibalizing policies. I think that might be an important distinction. Can you share what I’m talking about, what this issue is?

JULIE:

Yes. That’s very important. A lot of times when you see a quote come in to your firm for a cheaper price, that means that they’re trying to buy the business in your area. They may not know what the jurisdiction brings in claims experience. They may be just trying feelers out there to see what kind of business they can bring in the door, but typically if it’s a cheaper policy, it’s going to be cannibalizing. You are not going to have limits on the outside of your per claim limit, and you will probably have a hammer clause, meaning if a claim were to arise and you don’t agree to settle it with the carrier who you’ve been insured with, they are going to walk away, and you’re going to be left holding the bag.

MARK:

Okay. I want to make sure that we’re clear. When we talk about limits being inside or outside, if I have my defense costs inside limits so that every dollar that gets spent on defense is going to erode what’s available for the loss payment.

JULIE:

You’re exactly correct. It’s going to erode that per claim limit, and you want to look for defense costs on the outside of your per claim limit with the carriers that you are shopping with.

MARK:

That seems to me to be a pretty important thing.

JULIE:

That’s very important.

MARK:

Just to understand, so two policies that are on their face may provide a million dollars in coverage, but if the cheaper policy has defense cost inside limits, I’m really not getting a million dollar policy, so that’s why it’s cheaper.

JULIE:

That’s correct.

MARK:

Okay. That makes sense. That makes sense. Continue on. We’ve talked about the relationship, we’ve talked a bit about some of the features and looking at some of the pricing issues. Are there other things that come to mind yet?

JULIE:

Well, the add-on to the pricing, responsible pricing. You want to look for a carrier that’s had some experience in that jurisdiction, that’s been there a while. They know the climate, they know the jurisdiction, and they are going to rate accordingly and responsibly. If you see a carrier come in real low, they’re just trying to buy your business, and they might do a bait and switch the following year. Be careful when you’re shopping and looking at pricing.

MARK:

Again, it seems to me, is it worth even asking how long you have been in a market if I’m shopping and-

JULIE:

Absolutely. The other important factor is if that carrier is endorsed by the state bar. Many state bars around the United States will endorse a carrier, meaning they’re giving back to that community, that legal profession in that community, and that’s an important factor as well. It comes with a-

MARK:

Okay. All right, so what I’m hearing on sort of the takeaway with this piece is just looking at commitment to the local market, that I want to work with an insurer that is committed long term. That makes a lot of sense. Okay.

JULIE:

Customer service plays into it as well. You want somebody who’s going to return your calls, who’s going to answer your questions, respond to your email in a timely fashion, and hopefully under 24 hours. You shouldn’t have to chase them down. They should be willing to talk to you, whatever it is that comes about and you need help with.

MARK:

Okay. Excellent. Excellent. Boy, I wish I had known that years ago, let me tell you, before I got into working with an insurance company. Are there any final thoughts or other things you’d like to share, Julie?

JULIE:

Yeah. Probably just a quick input on claims handling. Double check on how they handle the claims, how you report a claim, are you going to be assigned a claims attorney to work with or a claims adjuster, very important. You really want somebody who is a claims attorney, who is an attorney who can talk on your level, and find out who their defense panel is in your jurisdiction, and if you have input there. That’s important as well. You really want input instead of them picking an attorney that maybe is somebody you don’t respect in your jurisdiction.

MARK:

Right, right. This has been great stuff. The big takeaway for me is this isn’t just like going to a store and picking out some item for home or something. What you’re really saying is we’re entering into a partnership here and heaven forbid again, something come up in terms of a blown statute or some other type of significant claim. What you’re really telling me is that the relationship that I’ve created with the carrier is really going to be key in terms of how we get through all this in the end.

JULIE:

It’s very key.

MARK:

Yeah. Good stuff. Good stuff. Well, thank you very much for joining us today.

JULIE:

You’re welcome. Yeah, thank you.

MARK:

Thanks to all of you for listening to the show. If any of you have any questions about the issues Julie and I have discussed, please don’t hesitate to contact me here at ALPS at mbass@alpsnet.com. We’d love your feedback on the podcast including hearing about any other issues or topics you’d like to hear us cover. That’s it. Thanks again, Julie. Thanks to all of you.

JULIE:

Thank you.

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