Excess Coverage for Solo Practitioners and Small Firms
As a solo practitioner or small firm, you may not think you need higher insurance limits because of your size. However, the amount of coverage you need is dependent on many factors, not just the size of your practice. The information below will help you understand your mandatory coverage through your law society and the additional excess coverage that is available to you.
Mandatory Coverage for Solo Practitioners/Small Firms
As a lawyer in a CLIA Subscribing jurisdiction, you have:
Mandatory Errors and Omissions (E & O) insurance with a limit of $1M per claim and a $2M annual aggregate limit; and
Mandatory Cyber insurance ranging from $100K to $250K for various common cyber claims. See our Cyber Insurance Overview information to better understand your mandatory coverage.
Members who are insured under the CLIA mandatory policy, are insured on a “claims made” basis. Any claim or potential claim must be reported within the policy period in which the insured had knowledge of the claim or potential claim. When a policy period expires, the Insurer is free of liability for any occurrences except those the insured had knowledge of and was reported prior to expiry of the policy period.
CLIA Voluntary Excess Program
By customer request, CLIA’s Voluntary Excess Program (VEP) now offers the flexibility of additional coverage limits, extending up to $35 million per claim, with an annual aggregate limit of $35 million. Coverage options under the VEP include limits of $1 million, $2 million, $3 million, $4 million, $6.5 million, $9 million, $14 million, $19 million, $24 million, $29 million, and $34 million, in excess of a $1 million base.
In addition, CLIA continues to offer a stand-alone cyber insurance product with higher limits than the cyber coverage we offer with the mandatory insurance. The stand-alone cyber insurance can be purchased in conjunction with the excess liability coverage or on its own. See our Cyber Insurance Overview materials for more information.
Do I need Excess Coverage?
Although mandatory insurance coverage applies as long as the occurrence took place during the period in which the member was insured, excess coverage does not apply. Like most liability policies, our excess liability program is “claims made”, meaning insurance needs to be in place when a claim is made and not when the work is done. It is not transactional based coverage. Statutes of limitations provide for a time period in which to present claims, and firms that do not renew their insurances will not have coverage for losses reported after the expiry date of the policy. As such, coverage purchased out of the need for a single transaction will need to be purchased as long as the possibility of a claim still exists.
As the value of client’s transactions increases over time, so too does the need to secure adequate levels of Errors and Omissions (E&O) insurance. One large claim could quickly erode the primary policy, leaving you or your firm exposed to significant personal liability.
Factors to consider when determining whether you need excess coverage:
The type of transactions and the potential impact on your clients;
The size and frequency of large transactions;
Whether former associates and partners have coverage that is either inadequate or excludes their past activities; and
Whether the impact of the advice you’ve provided (and therefore potential liability) may grow over time.
Don’t Forget:
Not Just for ‘Higher Risk’ Areas or Large Firms: All legal work can have exposure to large value claims. Don’t equate the amount charged to a client with the potential claims amount if an error occurs. Even ‘small matters’ like a will prepared by a small firm in a rural community could result in a claim over the $1 M limit.
Assess Risk of Firm, Not Individual: Assess the risk for the firm, not just you individually.
Low Investment in Added Security: Professional liability insurance is the cheapest form of insurance that there is. Lawyers can purchase $1M in coverage for $500.00 (2023) and the price per million goes down as the limit increases. For example, in 2023, $19M coverage = $102.00 premium/million (total $1951.00 premium).
See our website for more information.