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|
| Q. |
Why
is it necessary to complete an application each year?
|
| A. |
The
claims-made policy is not a continuous, renewable policy. Upon
expiration, a new application is required. Underwriting relies upon
the statements in the application to determine if any changes have
occurred during the previous policy period. After an underwriting
review and premium payment, a new policy is issued. The application
attaches and is made a part of the policy.
|
| Q. |
How long does it take to be underwritten?
|
| A. |
Normally, it takes seven to ten days, if complete information is received. Things that can slow down the application process include an incomplete or unsigned application, as well as failure to include a specimen letterhead along with the application. Previous claims or disciplinary history must be reviewed and can require more time to underwrite. Failure to fill out the real estate and banking application for attorneys who practice in those areas can also slow it down.
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| Q. |
Why can't I get a quote over the telephone without having to fill out an application? |
| A. |
Each application is underwritten individually, on its own merits. A written application must be received and reviewed for the dozens of factors that affect the premium quotation. Telephone quotes without a supporting application would be unreliable and a source of misunderstanding, therefore we do not give them. Attorneys needing a quick quote can fax their applications to us to speed up the process.
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| Q. |
If I change to AIM insurance, do I have to buy tail coverage with my old insurer? |
| A. |
In most situations, if you have been continuously insured with no gaps in coverage, your quote normally includes full prior acts coverage; therefore, purchase of a prior acts coverage endorsement from your old insurer isn't necessary. Some special situations are, for example, a dissolving or fragmenting firm that has not been insured by AIM, where the applicants are not the successors in interest to the dissolved or fragmented firm. Such situations may not allow full prior acts coverage to be given under the terms of AIM's policy. AIM's ability to provide full prior acts coverage generally is very broad.
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| Q. |
If my firm forms an LLC, can an individual attorney be insured separately?
|
| A. |
No, as in the case of a partnership, professional
corporation, or solo
P.C. practicing as a firm, all attorneys must be insured. AIM requires that all attorneys who practice together, regardless of entity type, be insurable and insured under one AIM policy.
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Changes in Firm Membership
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| Q. |
If an attorney leaves my firm mid-term during the policy period, will AIM give me a pro-rata refund of the policy premium attibutable to the attorney who left?
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| A. |
There are no premium adjustments made during the policy period for attorneys leaving a firm. Therefore, there are no refunds. On the other hand, if an associate joined a firm mid-term, you would not be charged an additional premium for that policy period. Premium adjustments are made at your policy's anniversary date.
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Coverage Issues
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| Q. |
Does the AIM policy provide coverage for my acts as a title agent or title abstractor?
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| A. |
The AIM policy extends coverage to work performed as a title agent or title abstractor when these services are performed in an attorney-client relationship. The AIM policy, however, is not a title agent's errors and omissions insurance policy.
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| Q. |
Does an insured have coverage under AIM's policy for non-attorneys (e.g., paralegals, law students)?
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| A. |
Coverage is derivative, as the insured has coverage for any act, error or omission in professional services that have been or should have been rendered by any person for whom the insured is legally responsible. Non-attorney personnel do not have individual rights under the policy.
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| Q. |
What are the consequences of gaps in coverage under "claims-made" policies?
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| A. |
There is no coverage if a suit is filed against the attorney while the policy has lapsed. If you obtain coverage in the future, coverage for acts, errors or omissions may not be provided for an act, error or omission prior to the gap in coverage. We recommend firms have an agreement with its members regarding the purchase of tail coverage in the event of the dissolution of the firm. Remember, paying your policy premium on time prevents a gap in coverage!
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Deductibles
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| Q. |
Why is a lower deductible advisable for most law firms?
|
| A. |
The deductible, as stated in the declarations, is applicable to each claim and includes payment for damages
and claim expenses, whether or not payment for damages is made. Therefore, the deductible applies against defense expenses, and in most cases the premium savings are not sizeable enough to warrant a high deductible.
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Exclusions
|
| Q. |
What necessitates a "Specific Claims Exclusion Endorsement" on my claims-made malpractice policy?
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| A. |
This endorsement is used to exclude known claims or incidents which occurred under a previous carrier's policy. Such claims or incidents would be covered by the previous carrier if, while coverage was in effect, they are reported to the previous carrier. Known claims or incidents that occurred under a previous carrier's policy are not covered by AIM. They are excluded on your initial and successive AIM policies. When changing coverage from another carrier to AIM, be sure that you have reported to the other carrier all problems that could give rise to a malpractice claim before your coverage with that carrier terminates. |
LLC's
|
| Q. |
In 1993 the Alabama Legislature enacted the Limited Liability Company Act (Ala. Code 1975, § 10-12-1, et seq.) which allows a member of a limited liability company to be liable for a "negligent or wrongful act or omission" in which he personally participates as though he were a sole practitioner (§ 10-12-45). If attorneys practice in an LLC, will that reduce their malpractice premium rate?
|
| A. |
Probably not. LLC acts are still largely unconstrued by appellate courts due to their recent enactment in most states which have them. The practical effect of the protection purportedly afforded under an LLC statute is yet to be determined. In any event, it is clear that an individual attorney who is alleged to have committed malpractice under an LLC must still be defended and/or indemnified. Where more than one attorney in an LLC participates in a case or transaction, it is likely that all participants will be the object of suit. Whether, in theory, one attorney is the focus of a suit or whether all attorneys in a firm are, it is doubtful that the LLC act will decrease insurance exposure. AIM will, however, watch this matter carefully. As a mutual insurer, AIM is committed to fair and reasonable premium rates. If it becomes possible to reduce the cost of malpractice insurance for attorneys practicing in LLC's, AIM will do so.
|
| Q. |
If my firm forms an LLC, can an individual attorney be insured separately?
|
| A. |
No, as in the case of a partnership, professional
corporation, or solo
P.C. practicing as a firm, all attorneys must be insured. AIM requires that all attorneys who practice together, regardless of entity type, be insurable and insured under one AIM policy.
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Premium Rates |
| Q. |
In 1993 the Alabama Legislature enacted the Limited Liability Company Act (Ala. Code 1975, § 10-12-1, et seq.) which allows a member of a limited liability company to be liable for a "negligent or wrongful act or omission" in which he personally participates as though he were a sole practitioner (§ 10-12-45). If attorneys practice in an LLC, will that reduce their malpractice premium rate?
|
| A. |
Probably not. LLC acts are still largely unconstrued by appellate courts due to their recent enactment in most states which have them. The practical effect of the protection purportedly afforded under an LLC statute is yet to be determined. In any event, it is clear that an individual attorney who is alleged to have committed malpractice under an LLC must still be defended and/or indemnified. Where more than one attorney in an LLC participates in a case or transaction, it is likely that all participants will be the object of suit. Whether, in theory, one attorney is the focus of a suit or whether all attorneys in a firm are, it is doubtful that the LLC act will decrease insurance exposure. AIM will, however, watch this matter carefully. As a mutual insurer, AIM is committed to fair and reasonable premium rates. If it becomes possible to reduce the cost of malpractice insurance for attorneys practicing in LLC's, AIM will do so.
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| Q. |
Do AIM's premium rates reflect the statute of limitations for the Alabama Legal Services Liability Act?
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| A. |
The premium rating of AIM is based upon many factors including the relatively short period of time applicable to the Alabama act. In addition, attorneys can be sued under federal causes of action and in foreign jurisdictions in which they practice, both of which may have different and longer statutes of limitations. The rating structure also consists of rating an attorney based upon one of five "steps" (one for each year of private practice) until the insured attorney reaches a mature rate.
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| Q. |
Will my
premium go up if I report a claim?
|
| A. |
Probably not.
In most cases, the premium will not increase due to reporting a
single claim. Underwriting will evaluate the frequency and severity
of multiple claims reported to determine whether an increase in
premium is warranted or whether insurance can still be offered.
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"Units" (Debentures)
|
| Q. |
Does a "unit"
(debenture) have to be purchased in order to obtain insurance from
AIM?
|
| A. |
No. Effective May 15, 2000, AIM
no longer requires new insureds to purchase a unit in order to meet one
of the requisites of obtaining insurance. The purchase of "units"
(debentures) was initially required to capitalize AIM and continued to
insure that it maintained an adequate capital base. After ten
years of operation, AIM has achieved a very strong capital base and
terminated the requirement for new insureds to purchase units.
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| Q. |
I currently
hold a debenture. When can I sell it back to AIM?
|
| A. |
AIM has called
for redemption of all the Debentures outstanding on December 31, 2006.
The redemption price will be the face amount of the Debenture ($1,000
per Debenture). The terms of the Debentures require the Company to pay
the redemption price to those persons who are the registered owners of
the Debentures or those persons chosen by registered holder to receive
the redemption amount, that are outstanding on December 31, 2006. The
payment of the redemption price is required to be made on May 1, 2007.
No interest is required to be paid on the Debentures. Redemption
Procedure: AIM will send its check for the redemption price to each
person registered in its records as the owner of a Debenture that is
outstanding on December 31, 2006. The check will be sent to the last
address in AIM’s records for the registered owner. The registered owner
of the Debenture will not be required to surrender the Debenture or take
any other action in order for his or her Debenture to be redeemed on May
1, 2007.
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| Q. |
What is the
procedure for transferring an AIM debenture purchased by a firm for an
associate?
|
| A. |
AIM is no longer accepting
transfers of debentures. A debenture holder can, however, designate some
one else as payee on the 2nd page of the letter of
transmittal used to redeem the debenture.
|
Q.
|
Does redemption
of my debenture affect my eligibility for insurance?
|
| A. |
No.
|
| Q. |
Why is AIM
redeeming
debentures?
|
| A. |
Debentures represent debt on
AIM’s books. Your AIM Board of Directors wants to repay the attorneys
who have supported AIM and reduce its debt.
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Tail Coverage (Extended Reporting Endorsement)
|
| Q. |
If an associate leaves a firm, will any acts, errors and omissions on his part (which occurred while he worked for the firm) be covered by my current and future AIM policies, or do I need to purchase additional insurance?
|
| A. |
It is not necessary to purchase an extended reporting endorsement to cover future claims which may arise due to actions of an associate while he was in practice with your firm. Your AIM policy provides coverage for any lawyer who was in practice with your firm, while acting solely on behalf of your insured firm and within his capacity as an attorney.
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| Q. |
If I am a sole practitioner retiring from the practice of law, how do I protect myself from any unknown acts, errors or omissions resulting from my practice of law? |
| A. |
Your AIM professional liability policy is written as a "claims-made" form and all coverages cease as of the expiration date. If you choose not to continue coverage, you may contact AIM for the "Extended Reporting Endorsement." This endorsement provides coverage for claims reported after the expiration date, subject to the terms and conditions of the policy. The request for this endorsement and payment therefore must be made within thirty (30) days from the policy's expiration date.
|
| Q. |
When does "tail" coverage become necessary?
|
| A. |
Professional
liability policies are written on a "claims-made" form and
all coverages cease as of the expiration date. Tail coverage (an
extended reporting endorsement) provides coverage for claims
reported after the expiration date of the policy. Tail coverage may
be necessary when a claims-made policy is replaced or rewritten
subject to an advanced retroactive date (which bars coverage for
certain years). Tail coverage is most frequently requested when the
claims-made policy is cancelled or not replaced (e.g., when an
attorney retires or leaves the private practice of law).
|
| Q. |
Can a non-AIM insured purchase the Extended Reporting Endorsement (tail coverage)?
|
| A. |
Generally, in cases of cancellation or non-continuation of the policy by either the named insured or the company (except for the insured's non-payment of premium), an AIM insured firm and scheduled individual lawyers insured who are also "members" of the company have the right upon payment of an additional premium, to purchase the Extended Reporting Endorsement. Non-AIM insureds cannot purchase the "tail" endorsement from AIM, but must purchase it from their present carrier.
|
| Q. |
If an attorney in a law firm leaves and begins practice as a sole practitioner or with a new firm, does he need prior acts coverage under a new malpractice policy? |
| A. |
In order to be eligible for full prior acts coverage under a new policy, one must be a majority successor in interest to the assets and liabilities of the predecessor firm(s) as named in the application for malpractice insurance. One attorney leaving a firm normally does not fit this definition. There are, however, two means by which he can enjoy tail coverage. The first is under his former firm's policy. In general, a former firm's policy provides coverage for an attorney who practiced with that firm and left. This is the case provided the former firm continues its malpractice insurance coverage. The attorney's coverage is only for acts, errors and omissions made while acting on behalf of the former firm up to the time the attorney left. If the former firm later discontinues its coverage, the attorney who left also becomes uninsured. This brings us to the second means of providing prior acts coverage. Insureds who are also "members" of AIM can purchase tail coverage when leaving their firm if they are concerned that their former firm may not continue its malpractice insurance coverage.
|
| Q. |
Does the extended reporting endorsement extend the policy period?
|
| A. |
An extended reporting endorsement (tail) merely extends the time to report or make claims; it does not extend the period during which covered occurrences may take place. Therefore, no coverage would apply under a lawyers malpractice policy if the act, error or omission occurs after the expiration of the claims-made policy, even if it occurs during an extended reporting period.
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