How to Choose a Professional Liability Policy for Lawyers
Whether you are a sole practitioner, mid-size firm, or provide contract work, professional liability insurance can help protect you. It may help cover lawsuit defense costs, shielding you against professional violation actions—be it for frivolous claims or damages to a client or third party.
How do you decide between the many policies available? Read on to find out.
Choosing Your Professional Liability Policy Step by Step
Lawyers tend to seek insurance based mainly on policy price. As a lawyer, it's important to do more than make budget-based insurance purchases, as not doing so could cost you your practice or personal assets. To avoid this, we recommend you find insurance tailored to your specific needs.
1. Determine Your State's Professional Liability Requirements
Professional liability insurance requirements for lawyers vary between states. Oregon and Idaho require lawyers to carry professional liability insurance, for example. Other states, like Alabama, have no such requirement. In some other states, the size and structure of the firm helps determine liability requirements. In Texas, for example, a limited liability partnership must carry insurance of at least $100,000 to help protect against vicarious liability. Make sure to verify your state's requirements.
Also, note that if you opt to forego professional liability insurance, you may be required to disclose this fact to future clients. For example, attorneys in New Hampshire, Ohio, and Alaska must provide written notice to clients if they don't have malpractice insurance or if their coverage falls below a certain level ($100,000 per claim or $300,000 aggregate). When you check with your state bar to determine professional liability insurance requirements, you may also want to ask about any such disclosure requirements.
2. Consider the Extent of Coverage You Want
Even if professional liability insurance is not mandated in your state, it can still be a useful investment. Litigation in the U.S. is rife. Professional liability (malpractice) insurance can help protect lawyers against losses incurred from third-party claims.
When considering how much coverage you want, take your law firm’s practice areas and caseload into account. Some types of law are at greater risk of claims and may anticipate more serious claims, such as intellectual property, securities, and entertainment law.
In contrast, defense firms are typically less prone to lawsuits. However, that doesn't mean that defense firms never get sued and should forego professional liability insurance altogether. Further, note that defense lawyers may face disciplinary complaints, which professional liability coverage may also help protect against.
Logically, the more comprehensive your coverage, the higher your premiums will be. Other factors that may impact professional liability costs include the size of the firm, its internal controls and its claims’ history.
3. Review the Policy
It's important to review and understand any professional liability insurance policy. Consider the following points that can impact policy costs and your risk of financial loss:
- Deductibles and policy payments: Understand policy deductibles, limitations, and maximum payouts. You want to confirm the deductible up front.
- Prior claims: Policy costs vary according to your area of law and any prior claims driving up insurance premiums. Be aware of your prior claims and those of your firm to assess how they might affect future coverage and policy costs
- Policy depletion: If defense costs or indemnification to claimants have already been paid out, there may be insufficient coverage funds in the remaining amount for other claims. Make sure that you consider insurance limits with the worst-case scenario in mind to avoid risking your business or assets.
- Policy Features- Not all policies are the same. Lower priced policies can provide less coverage features which many times get overlooked. Do claim expenses reduce the limit of liability? What “Tail” (e.g. Extended Claim Reporting Period) options exist and at what cost? Like most products, quality and price are separate issues to consider in getting an option for your business.
Taking the Next Steps with Aon Attorneys Advantage
As a lawyer, you are responsible for clients in a big way. This leaves you vulnerable to claims based on your or your firm's mistakes.
Having a professional liability insurance policy provides assurance and peace of mind. We provide professional liability insurance for lawyers at Aon Attorneys Advantage.
Get a professional liability insurance quote for your practice now.
This information is provided for general informational purposes only and is not intended to provide individualized advice. All descriptions, summaries or highlights of coverage are for general informational purposes only and do not amend, alter or modify the actual terms or conditions of any insurance policy. Coverage is governed only by the terms and conditions of the relevant policy.