Lawyers Professional Liability Insurance: Coverage Basics
Lawyers Professional Liability Insurance: What Is It?
It is certainly no secret to anyone that the cost of living has spiked. Inflation increased by close to 7% since November 2020, according to the consumer price index. The Bureau of Labor Statistics reported an increase of costs for nonfarm-related businesses at an annual rate of 9.6% during the third quarter of 2021. With the cost of doing business continuing to climb, many solo attorneys and owners of small law firms seek to control costs, including by considering cutting what they feel may be unnecessary expenses, such as their professional liability insurance coverage.
What is lawyers professional liability insurance? What does professional liability insurance typically cover? Is professional liability insurance for lawyers optional?
What Is Lawyers Professional Liability Insurance?
Lawyers professional liability insurance helps protect legal professionals against claims alleging an act, error or omission related to their professional services. In 2009, the Colorado Supreme Court began requiring that all practicing attorneys carry this type of coverage. In an article by Christopher B. Little, Mr. Little declares the primary reason lawyers need lawyers professional liability insurance (in addition to complying with jurisdictional requirements) is that “LPLI can protect the lawyer from career-ending claims or illegitimate suits and grievances.”
What Does Professional Liability Insurance Typically Cover?
The coverage provided depends on the particular policy. When choosing this type of coverage, it is crucial to understand your needs as well as what the policy provides.
Depending on how an insurance policy is structured, it may include coverage for:
Claim expenses ‘outside’ the policy limits, leaving more coverage for potential settlements and judgments However, if claims against your law office are incurred because of criminal, malicious, or fraudulent acts, professional liability insurance does not cover them. It is crucial to review your policy and understand what it does and does not cover.
A suitable professional liability insurance policy for lawyers should be carefully chosen based on your needs and risks.
Is Professional Liability Insurance for Lawyers Optional?
Although it is clear that the costs of doing business continue to rise and small law firms, solo attorneys, and small businesses as a whole continue to feel the impact, the answer to this question is two-fold. The first part of the answer is another question that only you can answer. What is the requirement in your licensing jurisdiction?
In some jurisdictions, there is no requirement for lawyers to carry professional liability insurance, but if a lawyer does not carry it, they may have an obligation to notify their clients in writing at the time they enter into the engagement. California is one state that does this, according to Rule 3-410. Therefore, before you do anything else if you are considering non-renewal of your policy, review the guidelines in each jurisdiction where you’re admitted to practice to understand the requirements of each jurisdiction regarding professional liability insurance. What, if anything, must you do in each of those jurisdictions if you don’t have professional liability coverage? Will you still be eligible to practice?
Here is the second part of the answer. Facing a malpractice allegation on your own is costly. The person alleging malpractice could also file a bar complaint against you, triggering an investigation. The investigation, an allegation of malpractice, as well as a potential lawsuit looming could be more than stressful. It could cause a financial hardship if you do not have professional liability insurance. With coverage, some of the financial burden, including the defense expenses, may also be covered through the policy.
If having insurance is optional in your jurisdiction and you do not purchase it, consider what may happen to you and your practice from a financial standpoint. Remember that it isn’t just unethical attorneys who are reported to and investigated by the bar or face malpractice lawsuits.
Lawyers Professional Liability Insurance Is an Investment to Help Safeguard Your Practice
Lawyers professional liability insurance coverage is an investment. It’s a tool that enables you to help protect yourself and the practice you’ve worked hard to build. Let Aon Attorneys Advantage help tailor a policy that fits your needs and provides you with peace of mind for your practice.
Get your free quote now for a professional liability insurance policy.
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.