The practice of law is extremely complex, and no matter how careful, experienced, or talented you are, you may one day find yourself at the wrong end of a legal action defending yourself against malpractice. This is why, if you are a practicing attorney, you need adequate professional liability insurance coverage for your firm.
Professional Liability Insurance for Lawyers
According to the American Bar Association, “Legal malpractice is defined as any act which is negligent or wrongfully executed by an attorney who causes monetary damages to his/her client. Legal malpractice can be perpetrated in any field of law.”
Some examples of behavior that can lead to malpractice claims include the following:
• Failure to pursue a case properly
• Failure to arrange for experts or witnesses
• Dismissal of a case for attorney negligence
• Failure to act before statutes of limitations or calendar deadlines expire
• Any action or negligence that unduly causes loss to the client
Attorneys are not required by law to obtain legal malpractice insurance, but it is extremely beneficial to both the attorney and his or her clients.
Why Do You Need Legal Malpractice Insurance?
Given that you are not legally obligated to secure professional liability insurance, why do you need it? There are actually several important reasons, and the sections below discuss each reason in detail.
Defray Defense Costs
You may be supremely confident in your ability as an attorney, but talent and diligence are not always enough to keep you safe from malpractice suits. An unhappy or dissatisfied client is liable to bring a case against you whether you are technically at fault or not, and legal defense expenses can mount quickly, no matter how frivolous the action is. Any attorney in private practice is at risk of being sued, and alleged malpractice can result in thousands of dollars in legal defense costs.
An estimated five or six percent of all private practice lawyers face charges of legal malpractice every year. Since the costs of defending against the charges often far outweigh the costs of professional responsibility insurance, this type of coverage is extremely common.
By purchasing adequate coverage, you can defray the costs of defending yourself against any malpractice suit, whether or not the claims against you are justified.
Clients Require It
Clients are becoming increasingly sophisticated when it comes to hiring legal representation. They know that in many cases, clients who sue their attorneys for malpractice are unable to recover more than a fraction of their losses due to a lack of law firm assets. Therefore, more and more clients require that their attorneys carry errors and omission (E&R) insurance so they know they will be covered in the event of legal negligence or performance failure. If you do not carry adequate coverage, you risk losing such clients.
No matter how experienced and skilled you are, mistakes sometimes happen, and clients do not think twice about suing to recover what they feel you cost them. Don’t roll the dice; be sure you are covered in the event that an oversight or error on your part costs your client a judgment. The cost to you of defending yourself against malpractice can irreparably harm your law practice.
A good legal malpractice insurance policy is a cost-effective way to have financial security in the event of legal action brought against you for negligence or professional failure, whether or not the case has any merit.
What Does Legal Professional Liability Insurance Cover?
When choosing a quality legal malpractice insurance policy, you should make sure it has certain basic types of coverage to protect yourself against most foreseeable situations. Some of the most important types of coverage are discussed in detail in the sections below.
Claims Made Coverage
“Claims made” coverage protects you in any action brought against you while the policy period is in effect, regardless of when the alleged malpractice occurred.
Pre-claim Assistance Coverage
Pre-claim assistance covers the costs of dealing with a potential legal action. It helps you manage risk when a project starts to go wrong and a client indicates that you are to be held accountable for financial losses.
Loss of Earnings Coverage
Loss of earnings coverage reimburses you for income you lose while resolving a claim. Typical coverage limits are $500 per day or $15,000 per year, but amounts vary by insurance carrier.
Legal work often requires considerable travel. Worldwide coverage protects you against legal actions resulting from errors or omissions when you provide legal services anywhere in the world, where allowable.
Pro Bono Coverage
Even when you offer your services free of charge, you are still at risk of being sued for legal malpractice. Pro bono coverage protects you when you provide low- or no-cost legal representation to others.
Network & IT Security Offense Coverage
Your law firm maintains countless client files with highly sensitive data. Network & IT security offense insurance protects you against claims of allowing a computer security breach, failure to control access to data or prevent unauthorized access, or of transmitting a computer virus.
Enhanced Settlement Coverage
If you reject a settlement opportunity and the client holds you responsible for higher settlement costs, enhanced settlement coverage softens the blow; the insurer pays 50 percent of the increased settlement amount.
Punitive or Exemplary Damages Coverage
If you are assigned punitive damages as part of your legal malpractice judgment, the insurer covers these damages, where allowed by law.
Of Counsel and Independent Contractor Coverage
This coverage automatically includes members of your team who are not firm associates or partners, such as Of Counsel attorneys and independent contractors.
Crisis Expense Coverage
Crisis expense insurance covers the costs of crisis management—e.g. hiring a public relations firm—that arise out of an error or omission of yours that adversely affects a client’s reputation.
Intra-firm Professional Services Coverage
Limited intra-firm professional services coverage defrays costs of a malpractice action arising out of providing legal services within the firm, in practice areas such as estates, trusts, probate, criminal defense, domestic relations or real estate closing.
Protect Your Assets and Your Firm
The coverage types discussed above are but a few of the countless types of legal malpractice insurance available from a wide variety of insurance providers. For a comprehensive list, consult a qualified insurance broker, like Balsiger Insurance, to discuss your individual needs.
Hopefully, however, you are convinced of the value—or necessity!—of a high quality legal professional liability insurance policy for your firm or solo practice. Mistakes happen, and unhappy clients will bring frivolous actions. Moreover, before engaging legal counsel, many clients require their attorneys buy malpractice insurance so they have recourse in case the practice fails in its representation.
By crafting a policy that meets your particular requirements, you can protect yourself against catastrophic loss in the event that (against all your plans and efforts) you do commit some form of legal malpractice. Coverage also protects you against the cost of defending nuisance lawsuits that have no legal merits, but which could nevertheless cripple your firm.
Balsiger Insurance is ready to handle your professional liability insurance requirements. Contact us for coverage in any of the following locations: Nevada, Florida, Tennessee, Utah, Idaho, Washington, Oregon, California, Arizona, Georgia, Colorado, Minnesota, Missouri, North Dakota, Pennsylvania, Ohio, Illinois, Wisconsin, Texas, and North Carolina.