Insurance can be a tricky thing. When you purchase insurance, you are purchasing a promise that if something happens, you will be protected. It’s not tangible.
Legal malpractice insurance is no different than any other type of insurance, you are paying for protection from the unknown. But, this type of insurance coverage can feel a bit different as many believe they are paying for coverage for a potential mistake. It can feel a bit foreign to be paying for protection against something seemingly within your control.
Many lawyers I speak to say, “But, I am careful and don’t make mistakes”. As a Senior Account Executive at Protexure, I have talked to thousands of attorneys over the years and I truly understand that as a legal professional, you work hard to prevent mistakes from happening.
The truth of the matter is that even the most experienced attorneys are at risk of having a claim brought against them. If there is even a perception of a potential mistake, you are at risk of a claim. And, claims often happen when they are least expected.
Before working at Protexure, I worked as a major case unit claim specialist and have seen firsthand the value of having insurance. Having the coverage available to provide you a strong defense if there is an allegation of malpractice made against you is worth every penny you will spend.
Benefits of Maintaining Malpractice Insurance
The obvious benefit to maintaining legal malpractice insurance is that it protects you against claims of professional negligence.
It also protects your firm from potential mistakes of current and past staff and associates. Plus, it protects you against any disciplinary or regulatory complaints against you and your firm.
An added bonus is the confidence and trust it builds with your clients. In short, it helps you manage your risk and provides you with peace of mind so you can focus on practicing law.
The consequences of losing a malpractice lawsuit is that you will be required to repay the client for the funds the client lost as a result of your alleged malpractice. Having legal malpractice insurance will then transfer this risk to the insurance company. In addition, the insurance company will pay for your defense. Being an attorney, you can understand how quickly the cost to defend a malpractice claim can add up.
Believe it or not, having malpractice insurance can be a benefit when you are in the process of accepting a new client or case. Having malpractice legitimizes you as a professional, which will give your potential client peace of mind. Having legal malpractice insurance shows the client that the attorney has invested in their career for the long term and has thought through the benefits of retaining legal malpractice insurance. Being able to disclose that you have malpractice insurance to clients can give you an advantage if they are shopping for an attorney.
What about when you retire? What happens if someone makes a complaint against you for work you did a few years prior but now you are happily retired. Are you covered? Well, if you have carried malpractice insurance, most policies will provide you with an extended reporting period (sometimes referred to as a “tail”). Here at Protexure, once you have been with us for 3 consecutive years, you will be provided that coverage at no cost.
The most obvious reason lawyers have malpractice insurance is in case they get sued — and both good and bad attorneys get sued for malpractice. A practicing attorney will always be at risk of making a mistake and being held liable. Further, they are at risk of a claim if the client perceives the case to have been handled improperly. Even in the absence of an actual error, an unhappy client could still file a frivolous complaint. This is the nature of the business. Purchasing malpractice insurance is crucial in managing these risks.
Legal malpractice claims most often occur when a professional decision or action made by an attorney results in losses for the client. The client then turns around and seeks to recover these losses by way of a malpractice action.
Insurance companies have compiled the most common types of claims that cause malpractice claims. Some of the most common mistakes that cause claims include missed deadlines, improper discovery, failure to apply the law, lack of consent or failure to follow instructions, errors in strategy and planning, and conflict of interest.
These can occur in any area of practice but we are seeing the majority of claims coming from Plaintiff Personal Injury, Real Estate law and Estate/Probate/Trust.
The impact of being uninsured for malpractice claims (in the industry this is called “going bare”) can be difficult to recover from. One claim can eliminate any perceived savings from not carrying malpractice insurance. It can also bring financial ruin to an attorney personally.
Although Oregon is currently the only state that requires all attorneys to have malpractice insurance, many other states require that an attorney disclose if they are not covered. This can leave a potential client with an uneasy feeling.
Choosing the best policy for your needs
It is important when shopping for malpractice insurance to do a cost/benefit analysis. Price is only one factor in the decision-making process and should not be the most important factor.
Talk to several experienced insurance agents who can provide you with many of the ins and outs of what to look for when shopping for malpractice insurance.
It is important to spend some time to learn the different options that are available and what makes sense for your unique firm. Here’s some important factors to consider:
- Does your quote include coverage for your prior acts?
- Are the coverage limits the same as you currently carry?
- Do you have or want optional coverages such as claim expense coverage in addition to the limit of liability (CEOL) or first dollar defense (FDD) coverage.
- What deductible do you currently have or want?
- Do you have any clients or contracts that require you to carry a certain limit of liability?
- How financially stable is the insurance company providing the quote and how long have they been in business?
Legal malpractice is an important part of the risk management of your firm. Going without it can have huge ramifications on your practice and livelihood.
Always do your homework and talk to experienced agents before making a final decision as there is a lot to consider. My favorite clients are the ones that ask me a lot of questions. Choose the coverage that provides you with the right amount of protection at a price that is manageable for the firm.