Legal professional liability, like all types of insurance, is based upon a deductible. Deductibles determine the amount due prior to coverage engaging for a given period, and there are usually a number of different deductibles available for a given plan. Deductibles for law firm PLI can vary not only in quantity but by coverage type (judgments, settlements, fees, etc.)
Typically smaller deductibles yield higher premiums, as the insurer coverage kicks in sooner. Identifying an appropriate deductible requires critical thinking about how often you or your firm is sued for malpractice. The smaller the average claim, the lower your deductible will need to be in order to effectively reduce your total costs. For firms sued infrequently, a higher deductible can save money as a result of considerably lower premiums. Depending on claims history, insurers may limit deductible choices.
Law firm professional liability deductibles usually apply to defense costs, judgments, and settlements. A number of insurers offer deductibles that apply to judgments and settlements exclusively, known as a loss-only deductible. Premiums for loss-only deductibles are higher because the insurer must pay all defense costs. If your career or firm history indicates that cases will often be resolved in your favor, and your greatest concern is legal fees for each time such a claim is brought, loss-only deductibles will typically be the best option.
