Avoiding Ghosts from the Past in Retirement

Whether as a distant goal or immediate concern, at some point in every lawyer’s career he or she will contemplate retirement. According to the American Bar Association’s 2023 Profile of the Legal Profession (Profile of the Legal Profession (americanbar.org)), 13.7% of the more than 1.3 million lawyers in this country are 65 and older which, interestingly, is nearly double the 6.7% of other professions in the United States. While the total number of attorneys continues to steadily increase, the ABA’s survey results show that there are approximately 178,000 practicing lawyers over the age of 65 who will be retiring in the upcoming years.

Much has been written about various financial and professional aspects of retiring and succession planning;, one key issue which I think is not emphasized enough is the importance of obtaining an extended reporting period for retiring lawyers. In part, I suspect that retiring lawyers have so many things to deal with when trying to wrap up a practice that they do not consider the fact that they might be sued years down the road for a case they handled before retiring. I have also discovered that lawyers in general do not understand that legal malpractice policies are “claims made and reported” policies.
Unlike commercial general liability, automobile, and umbrella policies which are typically “occurrence” policies, legal malpractice insurance is typically written as “claims made” insurance which means that there is only coverage if a claim is reported while a policy is in effect. Most legal malpractice carriers, such as ALPS, issue “claims made and reported” policies which add an additional requirement that an insured must report a claim when he or she first becomes aware of something that could reasonably be expected to be the basis of a claim.

Recognizing that their insureds will still face exposure to claims after retirement, most, if not all, legal malpractice carriers offer an extended reporting period to retiring lawyers. At ALPS, many insureds will qualify for a free extended reporting period of unlimited duration.  The insured must meet certain conditions such as  providing a written request for the extended reporting period within 30 days of the expiration or cancellation of his or her policy, attaining the age of 55, and insuring with ALPS under ALPS’ Preferred or Premier policies during the five-year period immediately preceding the retiring lawyer’s last policy expiration. . If those conditions are not satisfied, a retiring lawyer can still purchase an extended reporting endorsement but, either way, it is imperative to contact your carrier before retiring to discuss your options.

One additional reason I have heard as to why retiring lawyers did not obtain an extended reported endorsement when they retire from a firm is that they believed that they would be covered by their firm’s policy. While it is true that most malpractice policies cover retired lawyers for alleged malpractice committed while working for the firm, I have seen many instances where long-established firms have either dissolved or have gone with a different carrier – for example if the firm merges with or is acquired by a different firm – and the new policy does not provide prior acts coverage. Either way, retiring lawyers should not assume that the firm they retired from will continue or that their former firm’s policy will continue to cover them after retirement.

The key takeaway from all of this is that just because a lawyer retires from the practice of law,  does not mean that potential legal malpractice claims will also retire. And while retirement provides numerous opportunities to pursue interests outside the practice of law, retiring lawyers need to protect themselves by obtaining an extended reporting endorsement to avoid being haunted by ghosts from the past.