Experiencing professional liability claims can feel overwhelming for any lawyer, especially when you are already managing the stress of defending your reputation. Once the initial shock settles, many attorneys begin to wonder how the claim will affect the cost of their legal malpractice insurance going forward. These questions are common, and fortunately, the answers are not always as alarming as many assume.
Understanding how insurers evaluate professional liability claims can help you prepare for renewal season, anticipate potential premium changes, and make informed decisions about your coverage. By knowing what factors carriers consider, you can better position your firm for long-term stability.
When you apply to renew your malpractice policy, insurers always look at the past year’s activity. A recent claim is one of the most significant details in the review process, because it signals a potential increase in risk. Even so, the outcomes can vary widely depending on what the carrier finds.
A key factor is whether liability was established. If you were found liable, the premium will likely rise because the carrier absorbed a larger financial loss. If no liability was found, insurers may still adjust the premium slightly to reflect the defense costs they incurred. Defense fees can escalate quickly, and a costly defense often matters as much as the underlying issue.
Carriers also consider the claim’s total financial impact, including settlement value and legal expenses. Many insurers choose to settle early to avoid prolonged litigation costs, which can ultimately protect your long-term insurability. When defense spending becomes excessive, some carriers may consider non-renewal, even if the attorney was not responsible for the alleged error.
Also read: Does the Size of Your Non-Attorney Personnel Team Affect Legal Malpractice Insurance Costs?
Most professional liability policies, often referred to as Errors & Omissions (E&O) or Lawyers Professional Liability (LPL) insurance, operate on a claims-made basis. That means they provide coverage only if the policy is in force when a claim is made, regardless of when the error occurred.
The date you first purchased your policy becomes your “prior acts” date. As long as you maintain continuous coverage, you remain protected for all work done while your policy is active. For a retiring lawyer, that could represent many decades of legal work, all covered under one legacy policy. Discontinuity, such as switching carriers or canceling mid-term, may break that chain of coverage.
When you retire, you must ensure that your prior work remains protected, potentially forever. That is why an extended reporting period, an endorsement that keeps your coverage alive for claims made after retirement, is critical. Many insurers charge a heavy premium for it, but firms that maintain long-term continuity with their carrier often receive favorable terms.
Also read: What is a Claims-Made Policy? Understanding Legal Malpractice Insurance Coverage
A single incident does not define an attorney’s entire risk profile, but patterns do. When reviewing professional liability claims, carriers look for trends that may indicate recurring issues. If you have multiple claims or if two claims share similar circumstances, the likelihood of a premium increase becomes greater.
Longevity with the same carrier also makes a difference. A long, clean history can offset the effects of a new claim because it demonstrates reliability. Insurers often view established clients more favorably than new applicants with limited history. This is why staying with the same carrier, even when small price differences arise, can ultimately benefit your firm.
At Protexure, for example, tenure is often one of the first details reviewed when claims arise. Firms that maintain consistent coverage and a clean record are more likely to receive renewal terms that are stable and predictable.
Also read: How to Protect Your Firm from Legal Malpractice Insurance
Even when you do everything right, external factors can still influence your premium. Broader shifts in the legal malpractice marketplace affect pricing across the industry, regardless of your personal claim history.
In recent years, insurers nationwide have reported a rise in the average claim severity. According to recent industry data, legal malpractice payouts have increased due to higher settlement values, more complex cases, and growing defense costs (Business Wire). When carriers experience larger losses in specific states or practice areas, they may raise premiums or reduce their market presence.
Economic conditions also play a role. During periods of financial uncertainty, clients tend to be more cost-sensitive and more likely to challenge the outcome of a case. This trend can lead to a rise in professional liability claims, even when attorneys have acted appropriately. Insurers must adjust prices to account for the widening risk environment.
Because these marketplace variables are outside your control, even attorneys with minimal claim activity may see changes during their next renewal cycle.
Many attorneys assume that premiums will skyrocket after a claim, but increases are often less severe than expected. A single claim, especially one without liability, may lead to only a modest adjustment. The outcome depends heavily on the carrier, the nature of the claim, and the overall state of the insurance marketplace.
Although no insurer can guarantee how much your rate will change, there are proactive steps you can take to reduce the effect:
Overall, the cost of malpractice insurance after professional liability claims varies, but again, many firms experience less disruption than anticipated. Understanding the contributing factors can help you plan ahead and avoid surprises.
Also read: Proactive Strategies for Better Risk Management for Law Firms
Navigating professional liability claims can be challenging, but having the right insurance partner can make the process significantly easier. A supportive carrier not only helps manage the claim but also guides your firm through renewal considerations, risk mitigation, and long-term planning.
If you're looking for coverage tailored to solo practitioners and small to mid-sized firms, consider exploring Protexure Lawyers’ Professional Liability Insurance. Protexure offers competitive rates, attentive service, and protection against common risks, including missed deadlines, incorrect legal advice, conflicts of interest, and filing errors. Our policies provide essential financial support in the event of a claim, helping your firm stay secure and resilient.
Learn more about safeguarding your practice with Protexure Lawyers’ Professional Liability Insurance.