Nov 14, 2021 · Malpractice insurance, also known as professional liability insurance, protects licensed professionals from liabilities associated with wrongful practices resulting in …
Any attorney in private practice should carry malpractice insurance. One misstep in a case could lead to liability to a client who sues for malpractice. Fighting a malpractice case can cost thousands of dollars, and an adverse judgment could cost even more. If a claim does arise, malpractice insurance can serve as an important financial buffer for the lawyer and law firm …
For most lawyers, malpractice insurance coverage is something they need but hope to never use. But JoAnn L. Hathaway, author of " Legal Malpractice Insurance in One Hour for Lawyers ," thinks lawyers should be well-informed about their coverage needs and protection. In her book, Hathaway, Michigan State Bar practice management advisor, licensed ...
Legal malpractice insurers are licensed by the insurance regulating authority in each state in which they write coverage. One source of information on the carriers that write legal malpractice insurance in the state where you primarily practice is the Insurance Information section of the website of the ABA Standing Committee on Lawyers’ Professional Liability .
Underwriters can help protect their insured lawyers by working closely with the insured’s insurance agent to make certain the insured understands their unique risk factors and make recommendations on adequate limits and policy coverage.
Many insurance carriers employ risk managers whose job it is to educate the carrier’s insureds on various risk factors and provide them with resources and knowledge to protect them from becoming a malpractice statistic.
For more than 30 years, the ABA Standing Committee on Lawyers’ Professional Liability has compiled a study called the Profile of Legal Malpractice Claims. Produced every four years, this study provides a panoramic view of malpractice claim trends. The most recent study includes claims statistics from 2012–15. The publication contains a wealth of valuable information, including that the top three highest risk areas of practice are: personal injury – plaintiff, real estate and family law.
Often, a predecessor firm can be included in the new firm’s insurance policy if the new firm has assumed at least 50 percent of the predecessor firm’s assets and liabilities and if at least 50 percent of the attorneys from the predecessor firm become members of the new, successor firm.
One of the biggest mistakes is choosing based upon price alone. Pricing should be a factor, but trying to compare quotes from various carriers can be a daunting task, at best, and this is where an experienced insurance broker can help.
Among the factors that influence pricing are policy limits, retentions/deductibles, claims history, geographic location as well as others a carrier may view as either elevating or lowering your risk to them as an insured.
The publication contains a wealth of valuable information, including that the top three highest risk areas of practice are: personal injury – plaintiff, real estate and family law. Underwriters not only review an applicant’s practice area concentration for risk, but also for type of risk.
These “reporting provisions” differ from policy to policy, but virtually all require immediate reporting when a client or former client makes a demand for money, or files a proceeding against you. Other policies may require reporting when you become aware of facts which may reasonably give rise to a future claim against you. The consequences of not reporting a potential claim or claim under the reporting requirements within the policy period can be severe and ultimately lead to a denial of coverage if you need it later. It is very common for a law firm to be threatened by a client with a malpractice lawsuit, and report the threat to the carrier, but not be sued until a year later. In that case, the later lawsuit is likely covered under the policy under which the initial report of claim or potential claim was made.
However, if your prior firm dissolves or ceases carrying coverage, you would no longer have coverage for your acts at the firm (prior acts coverage). In that circumstance, you should explore purchasing Extended Reporting Coverage, otherwise known as “tail coverage” for the work done at the prior firm.
Finally, keep in mind that almost all malpractice policies “deplete,” meaning the fees and costs for your defense are paid from the limit available for the claim. If you have a very low limit ($100,000, for example), then it may be possible that you do not even have enough available to defend the case through trial (leaving nothing left to satisfy a potential judgment).
This is important because the way these terms are defined will, at least in part, determine the scope of your coverage. You want to make sure that whatever it is you do at your firm, in terms of providing services to clients, falls within the definition.
A consideration is the nature and extent of both your business and personal assets, since, if you are liable for malpractice, your personal assets are potentially subject to collection under a judgment.
It is extremely important to be as candid and truthful as possible on the application, and answer the questions asked. The failure to do so could have serious consequences, such as denial of a claim. If there is a question that asks if there is a potential for a claim, or facts and circumstances that could give rise to the claim, then disclosure should be made. This situation may also give rise to a duty to report under the policy currently in place.
You are generally covered for the work you did at the law firm under the law firm’s policy, even if the malpractice claim is not made until after you have left the firm, since most policies are “claims made.”.
Aon Attorney’s Advantage specializes in malpractice insurance for lawyers. In order to get a quote, the site wants you to fill out an application.
L Squared handles a variety of business insurance products. In addition to legal malpractice insurance, it also has a business owners policy (BOP) product, cyber liability insurance and worker’s compensation insurance, as a few examples. Because it’s an agency, it can help you understand which are the best insurance products and coverage amounts for your situation. To start the process, you must fill out an indication form detailing your practice.
Retroactive coverage may be necessary for a few reasons; the lawyer didn’t have insurance when they were working during these periods, or they had insurance, but the previous policy no longer covers them. A retroactive insurance may also be called, ‘prior acts coverage.’
Legal malpractice insurance is its litigation profession cousin. You might commonly see it referred to as lawyers professional liability insurance. It’s simply a type of insurance that protects lawyers when damages are claimed by the result of errors or omissions by the lawyer or colleagues.
Although it’s called, ‘Tail Coverage,’ this is actually an extension of your last insurance policy with an ‘Extended Reporting Endorsement.’ When you leave a practice, and unable to work as a lawyer any longer, or retire, your existing legal malpractice policy will end. If you don’t purchase an extension you won’t be covered by malpractice insurance if sued later for a prior act. However, the tail coverage keeps your coverage active even in retirement.
According to insurer ALPS, claims-made policies mean that claim has to be filed while the policy is in effect in order to be covered, versus occurrence where the event alone has to happen while the policy is in effect.
Type of practice: some practice types naturally have higher risks attached to them because of their complexity, like securities or medical malpractice, which can increase premiums
The American Bar Association maintains a Professional Liability Insurance Directory that lets attorneys see insurers that handle malpractice claims available in their state. State, local, and practice area bar associations may also have lists or recommendations for legal malpractice insurance providers.
However, depending on your practice area, insurers look at two primary things when calculating insurance premiums: 1) Frequency (the number of claims the firm is expected to receive) and 2) Severity (the anticipated size or loss the insurer expects for the firm based on practice area).
Understanding these characteristics will give you an idea of how much legal malpractice insurance will cost, and empower you with context and additional knowledge to bring into conversation with an insurance broker.
While attorneys can focus on tools and processes to minimize the risk of malpractice claims, having insurance for when things may go wrong is essential to the financial health of your law firm.
Most lawyers face a malpractice claim throughout their careers. In fact, according to the American Bar Association, 4 out of 5 lawyers will have at least one malpractice claim during their careers.
If your firm has part-time attorneys, you can expect pricing discounts based on the annual hours worked. It’s common to categorize lawyers working less than 1,000 hours as part-time, and they may qualify for a reduced rate. Some insurers may also quote a further reduced premium for those working under 500 hours.
More importantly, proceeding without insurance also puts the financial future of your law firm in jeopardy. A malpractice claim could easily deplete your law firm’s fiscal resources—even if you prevail against the claim.
Aon Attorneys Advantage is the brand name for the brokerage and program administration operations of Affinity Insurance Services, Inc. a licensed producer in all states (TX 13695); (AR 100106022); in CA & MN, AIS Affinity Insurance Agency, Inc. (CA 0795465); in OK, AIS Affinity Insurance Services Inc.; in CA, Aon Affinity Insurance Services, Inc., (CA 0G94493), Aon Direct Insurance Administrators and Berkely Insurance Agency and in NY, AIS Affinity Insurance Agency.
Your firm’s area (s) of practice and caseload within each area are primary considerations in determining your malpractice insurance policy’s annual premium.
Unlike other professions, whose annual malpractice premiums are determined based on a firm’s annual revenue, law firms are rated according to the number of attorneys in the firm.
The state in which your firm practices, and in some instances the location within the state, contribute to your policy’s annual premium. One factor that typically varies from state to state is how much your firm charges for services rendered on an hourly basis, with law firms in metropolitan areas typically charging more than firms in rural areas. Firms that charge higher rates typically see higher claims.
Past and pending claims can impact not only the cost of your firm’s policy, but also your eligibility.
In most states, our admitted policy has six steps . In the first year of your policy, the step increase can be anywhere from 30% to 50%. Each year the percentage of the step increase goes down, until the policy matures in the seventh year and you are paying the mature rate. *
While defense attorneys may not experience as many malpractice suits, they are still advised to carry insurance due to other risks. “Instead, we see a lot of disciplinary complaints,” Fox said. “If your client is in jail and feeling vindictive, it doesn’t cost them anything to file a complaint with your state licensing board.”
Malpractice is basically a mistake made by a professional, like a lawyer. Everyone makes mistakes. That includes lawyers. A lawyer may make a mistake due to many reasons.
Very few states require lawyers to have malpractice insurance. Idaho and Oregon require significant coverage. New Jersey requires limited liability law firms to have malpractice insurance for every attorney.
The cost of malpractice insurance for lawyers varies from $500 to over $9,000. Many factors affect how much malpractice insurance costs.
Most brokers offer a few options for what is covered in the malpractice insurance policy. At the lower end is a policy that only covers errors and omissions for the lawyer and law firm. It covers some costs like legal defense costs for malpractice claims, but not others like defense costs for hearings before the state bar association.
Both the attorney and the client should ensure the attorney has malpractice insurance coverage. Between four and five percent of attorneys face a malpractice claim during their careers. Disgruntled clients happen to everyone.
Malpractice insurance providers are rated by AM Best. The ratings are based on financial strength, credit ratings, issue ratings, and a national comparison to other providers. The ratings range D to A++.
Usually, malpractice claims must be made while the policy is in effect. If the lawyer paid for a one year policy, then the lawyer needs to notify their insurance provider about the malpractice claim during the year of the policy.
Premiums for a claims made policy are commonly set by step-rate, a pricing model where premium increases each year as the carrier is insuring more of the firms work.
Obtaining and maintaining malpractice coverage prevents attorneys and law firms from losing assets, paying high legal fees, and potential business failure in the event of a lawsuit. Additionally, not only is the firm protected against claims for professional negligence, but the staff and associates are also protected.
All attorneys should carry professional liability insurance because at some time in an attorney’s career they may encounter a dissatisfied client. Right or wrong, the client could sue the firm for malpractice and even if the allegations are frivolous in nature, it poses a large risk for the attorney’s livelihood. A professional liability policy protects an attorney from bearing the full cost of a potential claim made against them while providing legal services.
If you neglect to choose the pertinent limits of liability to protect your firm, you are putting your firm's assets at risk. In the long run, it is more financially efficient to purchase higher limits, and pay more in premium, than the potential cost of under insuring your firm. Saving a few dollars in premium is not worth the risk of losing your hard-earned assets.
For solo attorneys and small law firms, a Protexure agent can help you determine your coverage needs, help you through the application process, bind coverage, and answer any additional questions you may have about professional liability insurance.
Your law firm’s potential exposure can be determined by looking at your practice and examining the higher risk areas of practice you engage in. Some areas of practice that are affiliated with larger claims such as Real Estate, Trusts & Estates, Corporate Business Transactions, and Plaintiff Litigation may require larger limits of liability.
Additionally, not only is the firm protected against claims for professional negligence, but the staff and associates are also protected. Malpractice coverage allows the firm peace of mind and affords the attorneys time to focus on other aspects of their practice.
This is where malpractice insurance can save you a ton of costs and protect your mental peace. Malpractice insurance is also commonly referred to as professional insurance or error and omissions insurance. As you can make out from its name, it protects you in the face of lawsuits filed by clients claiming negligence, mistakes, or any form of unintentional malpractice. It can also cover the costs that come with lawsuits, settlements, and the financial repercussions of your mistakes.
Surely, if it’s such an important form of insurance, it should be a requirement for all practicing lawyers, right? It turns out, malpractice insurance is not required by state laws for most lawyers. That’s why many attorneys fail to realize its importance. However, what is legally required in at least 26 states is for attorneys who don’t have malpractice insurance to alert their clients of the fact that they aren’t covered, often in the form of a written and signed disclosure.