When it comes to insurance, we all hope to never have to use it. Unfortunately, when you haven't used something over time, the value of can feel like it decreases.
At times, legal malpractice insurance can feel like this and the value of it can be lost.
As a Renewal Account Executive at Protexure, I have heard my fair share of objections from attorneys about legal malpractice insurance.
“I don’t need malpractice insurance.”
“I don't make mistakes, so I wont get sued.”
“I am a solo attorney firm and can’t afford the high premiums.”
Before working at Protexure I spent 10 years as a claims case manager. After being on both sides of the insurance business, I have seen first hand the value of legal malpractice insurance. No attorney should be without it. Furthermore, I believe it is important to communicate the benefits attorneys receive for the cost of an insurance policy.
What the Cost of Legal Malpractice Provides Lawyers
Depending on the severity, a claim can cost you $50,000 to $100,000 after court fees, lawyer fees and any other fines or judgements.
Would your law firm be able to afford a large claim or suit that could result from a simple misinterpretation or piece of information that you were unaware of?
Malpractice insurance protects your law firm if sued by a client for mistakes or errors perceived by the client. Malpractice insurance will pay for settlement expenses, defense expenses, and judgements resulting from these errors.
Legal malpractice insurance provides attorneys with the peace of mind that they are covered in the event of a claim. Beyond peace of mind, insurance also provides a financial safety net for the law firm and attorneys.
The cost of malpractice insurance coverage also provides additional benefits aside from financial stability.
Legal malpractice coverage gives attorneys access to risk management and legal advice for their law firm. Whether it be engagement letters, legal contracts, or practice management tips, your insurance carrier will likely provide you with the tools you need to remain claim free.
Maintaining malpractice insurance coverage will also make you look more reputable to clients. Clients are more likely to put their trust in you if they know you are insured for the work and services that you are providing.
Disciplinary, regulatory, and activities incidental to the professional services performed by an attorney such as a notary public, trustee, executor or title agent can also be covered on this policy.
Protection from Claims
The main reason malpractice insurance is worth the cost for solo attorneys and small firms is the financial protection from potential claims or lawsuits.
The most common type of claims filed are those out of the control of the attorney.
Claims can arise from alleged neglect over the way an attorney has handled a case. The attorney could have done everything correctly, but the client perceives that there was an error. A lot of times the attorney is never aware that a claim was filed until a year or so after an incident occured.
Unfortunately, some areas of practice see more claims than others. For example, claims are often filed against personal injury attorneys for cases where a client believes the attorney did not get as much for the settlement as the client felt they should have received.
Frequent claims also arise in estate cases when a member of the family passes away. During this difficult time, family members may have clouded judgement in how they are viewing the process. On occasion, family members can discover issues that the attorney was not aware of prior to the agreement being drafted.
Regardless of the attorney’s area of practice, claims happen when they are least expected. Without malpractice insurance as your safety net, it could end up costing you exponentially more than the cost of coverage. A simple misinterpretation or even greed could cost you your livelihood.
The majority of us would be unable to afford a claim or suit without an insurance policy. It is much easier to come up with $1,000 to pay a deductible than to come up with $50,000 or more to defend yourself and resolve an unforeseen incident.
A large disbursement of money at one time can put a small business behind for years, or even cause the business to fail altogether. Additionally, being a small business owner, your livelihood and personal assets could be on the line.
A small law firm not carrying malpractice insurance or is underinsured is putting themself and their firm at a potentially great financial risk. Attorneys really cannot afford to not carry malpractice insurance for your small firm. A simple misinterpretation or even greed could cost you your livelihood.
The Cost of Legal Malpractice Insurance
Over time, the amount attorneys spend on yearly premiums is often less than what a malpractice suit would cost.
In addition to the overall cost of insurance likely being lower than a suit, the cost of insurance is spread out over time, making it more affordable for law firms.
The yearly cost of insurance is, in part, based off of the “amount” of insurance you purchase.
Maintaining appropriate limits of liability are crucial in protecting your firm in the event of a claim. Limits of liability should be chosen based on the size and caseload of your law firm.
Average premiums range from $1,000 to $2,500 depending on a variety of factors. While the true cost of insurance for your firm could vary, the takeaway is still the same. Yearly premiums are much easier to handle than a potential large dollar amount at one time in the event of a suit.
Your firm only needs to budget for a certain amount per year or even per month to cover your premium. If needed, the yearly premium can also be financed and broken down into quarterly or monthly installment payments.
Your malpractice insurance specialist can help you choose the appropriate limits for your firm while also keeping in mind your budget.
The purpose of malpractice insurance is to provide you with the protection you need, at a price that is manageable and appropriate for the law firm. Insurance carriers want to ensure that their insureds are receiving all the benefits they desire, making the cost of legal malpractice insurance worth it.