Depending on the nature of your legal work, you may have significant risks in the area of malpractice or "errors and omissions," in addition to the normal insurance needs of any business professional. America is becoming increasingly litigious as a society, and it is critical that any attorney or law firm have adequate professional liability protection.
There are two main policies that can protect you or your firm from malpractice lawsuits: general business coverage and attorney malpractice insurance, a professional liability coverage option specifically for lawyers. Read on for more details.
Law firms of all sizes, including sole practitioners, need the same basic business insurance every enterprise requires, in addition to coverage specific to the work of an attorney. Your coverage needs may include:
An experienced agent can assemble the complete insurance package you need and can help you compare rates from several different insurance providers. This way, you can choose the lawyer liability insurance that is right for you.
When you are looking for an attorney malpractice policy, it is important to know that there is no such thing as a standard policy. Every carrier's policy wording and provisions will be different. Carefully read a sample policy in its entirety to be sure the coverage is right for you before committing to coverage.
Most policies will typically cover:
A typical attorney malpractice policy will exclude certain acts:
You will need to decide what liability limits and deductibles are right for you. Every policy will provide defense coverage in case of a claim, but in some policies the defense costs will decrease the limit of liability. (This is called defense within the limit.)
Once you have the basic policy, higher limits are generally available at a reasonable price. It is smart to err on the high side, but this is an individual decision. Also, the higher the deductible you accept, the lower your premium will be. Some deductibles apply only to a claim payment while others will also apply to defense costs.
If your policy does have defense costs with the limit of liability, it may be wise to pick a higher limit of liability than you might otherwise. Policies with high liability insurance limits are often smart investments because defense costs can sometimes exceed the amount of a potential claim.
Attorney malpractice insurance, like almost all errors and omissions coverage, is written on a "claims made" form. This type of liability insurance differs from other types of liability coverage in some key ways.
For example, a general liability or auto liability policy will cover claims arising from occurrences while the policy is in force, whenever the claim is made. By contrast, a malpractice policy will cover claims made while the policy is in force, regardless of when the occurrence took place.
Key concepts regarding the claims made structure of attorney malpractice insurance:
Because of the structure of claims made forms, there are important issues that arise in certain circumstances, such as:
If you are a new attorney just starting practice, you will have no issue with a retroactive date. If coverage starts at the same time you begins practice, then the retroactive date will not limit coverage under your lawyer malpractice insurance.
Should you decide to change carriers, the new insurance company may insist on what is called a "retro date inception." In other words, the new insurance company will not provide coverage for claims arising from your previous activity under another policy. Sometimes it is possible to negotiate "prior acts" coverage for claims arising from acts prior to the inception of the policy. However, this can be very expensive and you should be sure to address this issue prior to making the change in carriers.
The other solution is to start with a policy that has a guaranteed right to purchase an unlimited reporting period. Such a provision is not readily available and will likely also be very expensive.
Here is the problem you may have in the future. If you want to change carriers for any reason, you will have to make sure that claims arising from prior activity will be covered somehow. You can do this in three ways:
Depending on the premiums involved, you may find that it is economically unadvisable to make a change.
If a claims made policy is terminated for any reason, coverage will cease, subject only to any extended reported period. Extended reporting periods come in three forms:
These solutions, in their various forms, are referred to as "buying out the tail."
If you decide to retire or change law firms, you will have the same issues as noted above when a firm wishes to change insurance carriers. And you have the same three solutions. You should research all this and make sure you have firm quotes in hand for whatever solution you decide on before making a move.
These are complicated matters and need to be addressed by an agent who has excellent knowledge of malpractice insurance and the many issues that can arise. Most importantly, you want to avoid making changes in coverage or employment until you have resolved the issues of retroactive dates, discovery periods and the definition of insured in any applicable policy.
Designing a business insurance plan is a job for an experienced agent, particularly when the stakes are high, as is the case with the legal field. Professional liability for lawyers must be managed on an ongoing basis by someone familiar with the many nuances and pitfalls inherent to attorney malpractice insurance.
Make sure you're doing your research to find the best policy for your needs and for your business budget. Collecting several quotes before you buy might seem time consuming at first, but an independent agent can make that process fast by collecting quotes for you in one office.