Should I get Excess Liability Insurance?

Excess insurance is relatively inexpensive, and well worth the peace of mind.  Lawyers tend to be born insomniacs – you don’t need anything else keeping you up at night!

LawPro’s standard (mandatory) policy provides coverage with insurance limits of $1 million per claim and $2 million in the aggregate.  This means there is $1 million in coverage for each claim, but no matter how many claims there are against you, the maximum payable for claims made during any policy year is $2 million.

I once ran into a lawyer who was practicing in residential real estate.  Somehow the topic got on to excess insurance.  He said he did not have any.  This was at a time when the majority of houses in the Toronto area were creeping up above the $500,000 range, and any house in a prime neighbourhood started at over $1,000,000.  I told him that even a purchase/sale deal worth $1,000,000 is in fact worth more, considering the transactional costs of the deal itself.  I told him that he has to take stock of the highest value of any file in his practice, and get excess insurance to cover it plus any unexpected surprises, such as a claimant saying the property was increasing dramatically in value.

Similarly with litigation.  If a claim comes in through the door for more than the limits of your existing excess liability coverage, phone your broker and get your excess insurance topped up.  For example, your average sole practitioner or small firm involved in personal injury will occasionally see a motor vehicle accident case involving a catastrophic victim.  The statutory accident claim itself could be worth upwards of $2 million, and these days tort awards into the high teens (millions) are not unheard of.  A missed limitation period or a bad result at trial could lead to a claim, several millions of dollars above the standard LawPro limits.  Why take the risk?

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