Whether you’re a solo practitioner of law or working with partners at a firm, having legal malpractice insurance will protect you from any unfortunate situations when a claim is made against you or your firm.
Mistakes are bound to happen and lawyers are liable for the decisions they make which have a direct impact on their clients personal lives and well-being. While some states may require legal malpractice insurance for attorneys, if you’re thinking about going without, understand the the consequences of being at the losing end of a claim against you can be devastating for your career.
This article will guide you through some of the benefits, considerations and examples of policies you can get to protect your legal services.
Why Purchase Legal Malpractice Insurance?
First and foremost, purchasing malpractice insurance protects you from any liability issues that can occur while performing legal services.
The cost of malpractice insurance for attorneys can come with a high annual premium. Depending on where you practice law, the area you practice, the years of experience you have, and the size of your firm, these are all factored into the annual insurance price.
Areas of practice such as real-estate lawyers and personal injury lawyers tend to pay higher premiums because these are seen as “high-risk” fields. Also, when a city has a higher number of malpractice claims, you can be sure to experience higher rates.
While he premiums may be extreme, especially if you’re a solo-practitioner or small law firm, malpractice insurance protects your reputation and personal indemnity.
For more detailed FAQs, please see the ABA Standing Committee on Lawyers’ Professional Liability
What to Consider When Purchasing Legal Malpractice Insurance
Legal malpractice insurance for attorneys can cover many situations while leaving you liable for claims you may not see coming. When your considering which legal malpractice insurance to purchase, here is a few things you want to have in your insurance policy:
- If you’re outsourcing or using a virtual receptionist, can your policy provide protection against outsourcing risks?
- Does the policy protect all your staff and associates?
- Will the policy give you peace of mind and confidence to practice law?
- Does the policy legitimize your practice and build client trust?
- Will you be protected against claims of professional negligence?
- Does the policy cover the expense of hiring an independent legal counsel to represent you in the case of a complaint?
Another important consideration when choosing legal malpractice insurance would be the types of coverage you can receive. Each claim can have limitations of liability ranging from a few thousand dollars up to millions.
If a claim is made against your law firm, you may want to know if you’ll receive an increase in policy charges in future years.
Rates for Legal Malpractice Insurance
The actual rates of your legal malpractice insurance will depend upon factors listed above as well as the answers to some questions you’ll have to provide.
Here’s an example of some of the questions you’ll be asked which will be used to calculate the cost of your insurance coverage:
- How many claims or incidents have you had per lawyer per year?
- What was the nature of the claims (i.e. frivolous, ordinary negligence, gross negligence, criminal conduct)?
- What was the degree of fault by the lawyer, (i.e. clear malpractice, statute of limitations, vicarious liability [when a lawyer leaves the firm])?
- Have you been rejected from other insurance carriers or was renewal refused previous insurance provider?
- What is the nature of your practice (i.e. family law, personal injury, etc.)
- What was your attitude / conduct with the client in resolving claims (i.e. attitude toward client)?
Insurance companies will examine your firm carefully to determine your eligibility and insurance premium rates.
Be prepared to share some of the intimate details of your law firm or solo-practice. You’ll have to share information like your attorneys professional conduct, history of previous claims, list of attorneys, their roles, hours worked, and more. Applications will vary from insurance company to insurance company.
Some of the major factors contributing to increased insurance premiums come from the following list of “red flags” which insurance companies are looking for.
- 2 or more claims from the past year
- 3 or more claims from the past 10 years (depending on the size of your firm)
- Type of claim
- Pattern of claims
- Being uninsured the previous 5 years
- Not paying a deductible
- Not cooperating with client suing
- Any bar disciplinary incidences
- Continued business relationship with clients that previous sued
- Possession of other professional licenses.
Researching the Best Legal Malpractice Insurance
The list above determining the rates of your insurance policy can seem daunting, you have complete power to research and find the best policy provider for your firm.
Performing your own due diligence and criticizing the fine details of the policy will be in your best insurance. Insurance policy providers is a business and the advertisements you receive in your inbox are simply trying to sell you on their premiums while not providing you the right coverage for your firm.
In the case that you are rejected from an insurance provider, you can make any requested changes to the practices at your firm and reapply. There are plenty of insurance companies to choose from and comparative shipping will allow you to find the best price at the best coverage.
Insurance Updates & Renewals
Once you have selected the best legal malpractice insurance for you and your attorneys, you’ll have to continue to send any information to your insurer regarding changes to your practice.
If you hire on more attorneys or take on different kinds of clients, you may have to make changes to your policy.
When your insurance policy expires, you are responsible to make any necessary updates to avoid defrauding the insurance provider which can lead to legal consequences.