Whether you are the attorney for the Plaintiff or the Defendant in a professional liability claim, specifically one in which the defendant retired from active practice shortly after the incident and suit wasn’t filed until just before the Statute of Limitations expired, for the benefit of your client, carefully check the defendant’s “Claims Made & Reported” insurance policy in effect at the time of the incident. The actual claim may have been made outside the policy period and not reported within the policy period suggesting, on its face, no coverage.
However, anticipating retirement, the defendant may have paid a slightly increased premium when the policy in effect at the time of the incident first incepted. This increased premium resulted in the issuance of a “Tail Coverage Endorsement” giving the defendant an additional two, three or even five years of protection from suits filed after the expiration date of the original policy. Now, instead of explaining to the plaintiff there is no insurance coverage if he or she wins at trial and discovery has shown the plaintiff cannot collect against the defendant’s assets because everything is, for example, in an irrevocable trust or some other form of untouchable estate planning arrangement, the plaintiff has an insurance policy that must respond to the claim. Likewise, the defendant professional has that same protection for the incident he or she would have had before retirement in the form of an insurer who must defend and indemnify the claim up to and including the limits of liability.
This is not an uncommon scenario and it is ripe for early mediation, especially if defense costs erode the limits of liability. When viewed objectively, mediation will likely save the parties significant time, expense, frustration and stress. Therefore, the moral of this story is: In professional liability cases, for the sake of all concerned, do not overlook the potential existence and application of a “Tail Coverage Endorsement” in any insurance policy that may apply.
Scott Newman is a mediator and arbitrator with Upchurch Watson White & Max.
