When deciding on which legal malpractice insurance policy is best for your firm, there are many factors to consider.
Over the years of working at Protexure, I have worked with lawyers at all stages of the buying process.
I have noticed that most firms will base their decision on which policy has the best coverage features that work for their firm. On the other hand, there are some attorneys who will only base their decision on which company has the least expensive quote.
Both price and coverage are important factors to consider, therefore, I strongly urge attorneys choosing a malpractice policy to not base their decision solely on one or the other.
Why Cost of Legal Malpractice Insurance Matters
Before basing a decision on price, it is important to understand how the cost is calculated.
The cost of a professional liability policy is based on a number of things. The main factors in pricing a policy are the number of attorneys at the firm, their step rate factor, and the areas of practice of the firm.
If a law firm is shopping around for new coverage and finds most of the quotes they received are comparable in price, this is normal. But, if a firm receives a quote for substantially less than the others, it’s vital to do your research and understand why.
Sure, some carriers offer a great price but it's always a smart idea to make sure their policy can back up the lower cost.
Price will not always determine the quality of the policy. A high insurance cost does not mean you are getting the best policy on the market. The same is true for the opposite, the lowest-priced quote does not always mean you are settling for a lower quality policy.
For example, if an insurance company tailors its program to a certain group, it might have a lower price. By specializing in certain areas, insurance companies lower their exposure and loss experience. Oftentimes these insurance carriers are able to pass along those savings to their insureds, resulting in lower premiums.
Doing Your Research
Understanding how pricing is determined and its effects on your policy is the first step to choosing the right policy. But the next step, and arguably the most important, is researching the policy and company before making your final decision.
Before taking a deep dive into the details of the insurance carrier and policy, you should make a list of what is important to you and your firm. Think about what coverages that you want a policy to include and what characteristics you want the carrier to have.
Are you looking for a policy that includes cyber coverage? What about a free extended reporting period? Is customer service important to you? Or, the ability to get a hold of an insurance agent rather than dealing with a phone recording? These are all things to consider.
Understand what’s in the policy and exactly what you are getting before you purchase one. A lot of policies have similar language, however, each one will have its own specific features. And, once again, price is not a reliable indicator of the quality of the policy.
How to Evaluate an Insurance Policy
Once you understand the cost of a legal malpractice policy, you will need to look into the specifics of each policy. There are many important parts of malpractice insurance policies. Below are a few of the important highlights attorneys should review before purchasing a policy.
- Disciplinary proceedings coverage
- How much will the carrier reimburse?
- Is it reimbursed per policy year or per event?
- Regulatory proceedings coverage
- How much will the carrier reimburse?
- Is it reimbursed per policy year or per event?
- Free retirement tail
- How many consecutive years does the attorney need to be insured with the carrier to qualify?
- Prior acts coverage
- Is the carrier going to offer full prior acts?
- Is career coverage going to be offered?
- Subpoena Assistance Coverage
- What steps does the carrier take to help their insured through these problems?
- Claims Reporting Process
- Ask how claims are reported
- What happens once you report a claim to the carrier?
Most policies will offer all of these features, but the amount of coverage could vary from policy to policy.
For example, some policies will cover up to $25,000 for a disciplinary matter while others might only offer $15,000.
How to Evaluate an Insurance Carrier
After understanding, price and policy features it is important to look into exactly who is providing the policy.
No attorney ever wants to have to report a claim to the carrier but if you do, you want to make sure that you have a strong carrier behind you. When deciding on which policy to purchase, take some time to research the history of the carriers.
For example, as an agent at Protexure Insurance Agency, I have been working with insurance carriers for 10 years. Many of which, have been providing legal malpractice insurance for over 25 years.
Oftentimes you will see agents jumping from carrier to carrier year after year. This is important to know before deciding if you want to purchase their coverage. You want to work with an agent that has developed a strong relationship with their carrier.
The time the carrier has been in business is also a very important factor to consider. Would you rather be backed by a well-known carrier who has been around many years or a new carrier where you don’t know much about their history?
The best place to start when researching an insurance carrier is with AM Best ratings. This will tell a lot about the carrier and how stable the company is. The AM Best ratings were created to show the financial stability of a carrier. By knowing the financial stability of the carrier you choose you will get a better understanding of their history and ability to pay claims.
Making the Final Decision on Your Legal Malpractice Insurance
Before making a financial decision on your legal malpractice insurance policy, review the costs, policy features, and the carrier to ensure you have found the right fit.
Many can get swept up in spending the least amount possible but this strategy could cause you to be sacrificing some important policy features.
When in doubt, always talk to an insurance agent about your options with their carrier. They are the experts and can help you navigate the complexities of choosing the right insurance policy for your law firm.
