Coverage Question Series – Part 39
Post on January 25th, 2019
This is a continuing series in which we address policy coverage questions that we routinely discuss with you and your colleagues. The answers provided are based on the basic policy form, currently LPLP-1s (effective for all policies new or renewed as of May 1, 2018). Refer to your specific policy and any endorsements attached thereto that may change coverage or the answers provided here.
I am interested in lowering my limits of liability, am I covered?
It depends. Professional liability policies are not occurrence policies like your car insurance. Occurrence policies cover acts or errors that occur during the policy term, regardless of when the claim is made.
Virtually all professional liability policies, including OBLIC’s, are claims-made and reported policies. This means that your coverage is limited to only those “Claims” that are first made against you and reported to us during the “Policy Period.” The policy in force at the time the claim is made and reported provides the coverage available to respond to a professional liability claim. Therefore, the limits of liability on the date the claim is made, subject to some exceptions, are the coverage limits that will apply.
If you lower your limits of liability on January 1, 2019 from $500,000/$500,000 to $100,000/$300,000, the lower limit will apply for any claims made and reported to OBLIC after January 1, 2019 (and during that policy term). Even if the alleged error occurred December 31, 2018, the new, lower limits would apply.
If you increase your limits of liability on January 1, 2019 from $100,000/$300,000 to $500,000/$500,000, the new limits would apply for any new claims made and reported to OBLIC after January 1, 2019. However, if you became aware of any acts, errors, or omissions which would reasonably be expected to be the basis of a “Claim” during the prior OBLIC policy term, the prior, lower limit would apply. If you were aware of such acts, errors or omissions prior to your first policy with OBLIC, you may have no coverage at all to respond to the claim.
As you should expect, these Q&A scenarios are based on simple hypotheticals. Coverage determinations for an actual claim are ultimately based on the unique facts, applicable law, and the Terms, Conditions, Limitations, Exclusions, and Endorsements of your policy.
Carl Marsh, Esq.