Malpractice Insurance for Lawyers: A Guide for Legal Professionals
Whether you are thinking of going solo, starting your own law practice, or have been practicing for a while, you should give malpractice insurance for lawyers some serious thought.
Among other things, it can help protect your assets, safeguard your reputation, and attract more clients.
However, before getting coverage, you need to know what you are looking for. Here are a few points to keep in mind when shopping for malpractice insurance for solo attorneys or law firms.
Malpractice Insurance for Lawyers: Things to Know Before Buying a Policy
The information below could help you find suitable coverage for your needs.
What Qualifies as Legal Malpractice?
Generally, for legal malpractice to be established, the following components must be present:
- Existence of a duty. Lawyers owe a duty to their clients to exercise reasonable care and avoid foreseeable harm in the performance of their work.
- Breach of such duty. Falling below the standard of care that would be used by other lawyers in handling a similar matter.
- Damages or harm. The client must have sustained harm as a result of the breach.
- Causality. The breach must have been the direct cause of the harm suffered by the client.
Examples of situations that could trigger malpractice claims include:
- Fraud, dishonesty, or misrepresentation
- Providing poor or wrong legal advice
- Failure to know or apply the relevant law
- Procedural, administrative, or planning errors
- Poor drafting of legal documents or financial agreements
- Procrastination, delays, or missing deadlines
- Failure to obtain client consent
- Poor investigation or discovery
- Suing the wrong party
Are You Required to Have Malpractice Insurance?
The rules vary across states.
, lawyers have to carry a minimum limit of $100,000 per occurrence or $300,000 as an annual aggregate. A handful of other states require business entities such as LLCs, LLPs, or PLLCs – but not independent practitioners – to carry certain limits as well. These include:
States that do not require attorneys and law firms to carry malpractice insurance may require disclosures to clients regarding coverage (or lack thereof).
With this in mind, you may want to check your local regulations to make sure that both you and your firm are fully compliant.
Why You Should Consider Purchasing Malpractice Insurance for Lawyers
Even if your jurisdiction does not require you to carry a malpractice policy, you should still consider getting one.
In its latest Profile of Legal Malpractice Claims 2016–2019
, the American Bar Association (ABA) found that the majority of claims (62.51%) in the reporting period were filed against firms with five or fewer attorneys. Solo practitioners ranked second with 32.33% of all claims.
The likelihood of facing a malpractice lawsuit may be even higher if you are in a high-risk field. According to ABA’s report, the top ten areas of practice in terms of claims frequency were:
- Personal injury – plaintiff (16.30%)
- Family law (12.81%)
- Real estate (12.37%)
- Estate, trust, and probate (11.98%)
- Collection and bankruptcy (8.21%)
- Business/commercial law (7.03%)
- Criminal law (5.95%)
- Corporate/business organization (5.22%)
- Patent, trademark, and copyright (3.05%)
- Personal injury – defense (3.01%)
Of course, it should be noted that firms with fewer than 20 employees make up an estimated 94.9% of the profession
, which could explain why smaller practices are responsible for the majority of malpractice claims. Moreover, ABA’s report notes that 1-5 attorney firms saw the net largest decrease in the frequency of claims from the previous reporting period.
Nevertheless, while the situation is not as grim as it may seem at first glance, a malpractice policy could still give you some much-needed peace of mind and help you market your firm and attract a broader clientele, as it is often required by clients and third parties.
How to Ensure You Have a Policy to Fit Your Needs
Consider the following steps when shopping for insurance for yourself or your firm:
- Work with reputable insurance providers. Look for providers that offer specialty insurance products for the legal profession and have a proven track record in the industry.
- Do not compare prices only. The cost of malpractice insurance for lawyers may vary across providers and policies. While the price point can certainly be an important consideration, you should also look into and compare the policy features to help ensure you have suitable coverage for your needs.
- Be fully transparent about your practice. Providing accurate and detailed information can help you avoid coverage gaps, coverage declinations, and policy rescission.
When to Obtain Malpractice Insurance
Ideally, you should obtain malpractice insurance at the planning stage before you start your private practice. If you wait, you risk creating gaps in coverage and exposing yourself or your firm to potential liability down the road.
That said, better late than never. If you have started practicing but do not have insurance yet, you can still get coverage – and should consider doing so as soon as possible. However, note that malpractice policies only provide coverage going forward. Any past acts are likely to be excluded.
What Else Should You Know Before Getting Malpractice Coverage?
Before committing to a policy, you may want to do the following:
- Review and compare different limit and deductible options.
- Consider purchasing higher-than-minimum limits to avoid depleting your coverage on defense only.
- Identify what additional coverages you may want. Examples include, general liability protection, and a business owners policy.
Looking for Malpractice Insurance for Lawyers?
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