Whether you are a solo attorney with one supporting staff member or a 5 attorney firm with an entire team of support staff, you want to know that your entire law firm is properly covered by legal malpractice insurance.
Non-attorney personnel who work for a law firm are included in the firm's legal malpractice insurance coverage. But, how much will the non-attorney personnel affect the cost of legal malpractice insurance?
As a Renewal Account Executive at Protexure Insurance Agency, I work with many law firms who wonder, does my support staff affect my malpractice insurance premium?
One specific law firm comes to mind when I think about this question. I worked with a law firm who was interested in finding ways to reduce their premium. They specifically requested that coverage was removed for their office personnel to help reduce their premium. While this seems like a reasonable request, I assured them there is no additional charge for non-attorney employees at the firm.
All work performed by employees of the firm on behalf of the firm is included under the law firm’s malpractice insurance coverage and is included in the firm’s malpractice insurance premium. There is no extra charge for support staff.
What Factors Determine the Firm’s Overall Premium?
Before we go into the specifics of how non-attorney staff affects insurance premium, it is important to first know what factors go into determining the cost of professional liability insurance.
The yearly cost of insurance is, in part, based off of the “amount” of insurance you purchase. After determining the limits of liability and deductible options right for your law firm, there are a few other factors that establish the cost of insurance.
Number of Attorneys
The first factor that affects the cost of legal malpractice insurance is the number of attorneys at the law firm. Essentially, how many people need to be insured
One of the biggest factors that determines premium is the areas of law in which the attorney and/or firm practice. Insurance companies evaluate their loss experience to determine practice areas that impact the frequency and severity of losses. Some areas of practice experience higher premiums due to higher levels of risk associated with these areas of practice.
Location of the law firm
A commonly unknown factor is the location of the law firm. Both the county and state the law firm is located affects cost. Locations with a significant number of claims or an increased severity will experience higher premium rates.
Annual Hours Worked
If you work a full 40 hours a week, you may have never come across this pricing factor. But if you work significantly more or less than the standard weekly hours, you could see an adjustment in your insurance rates.
Years of Continuous Coverage
The number of years a law firm has carried continuous legal malpractice coverage greatly affects the cost of insurance. If a firm has carrier insurance for less than five years, they will experience incremental premium increase called step rate.
Claims are also a factor in determining the cost of malpractice insurance. But, it does not have as big of an effect as you may think. Claims may not always mean a significant price increase. The severity of the claim, the payout amount, and the time since the claim will all factor into how much the cost of insurance is affected.
Finally, a commonly unknown factor that goes into determining your insurance premium factor is good practice management. The good news is, unlike the other factors, this one is 100% within your control and can save you money on your legal malpractice insurance. Carriers look for a handful of specific firm characteristics and management practices when determining pricing.
As you will notice, there is something I did not list as a factor that goes into determining price, and that is, support staff.
Does the Amount of Non-Attorney Staff Affect My premium?
The simple answer is, no.
Your premium will not change based on the number of non-attorney staff members at the firm.
Legal malpractice insurance premium is based on the number of attorneys working at the firm. Coverage for support staff at the firm is included in the firm’s overall premium. Coverage follows the firm and the work performed on behalf of the firm. The work of past and future personnel who perform work on behalf of the firm would also be covered as long as the firm maintains continuous malpractice insurance coverage.
Clerical staff, paralegals, accountants, those who assist in document preparation, and correspondence for the firm would all be covered for the work that they perform on behalf of the firm. These non-attorney personnel would have coverage for the work that they do for the firm provided the firm maintains continuous malpractice insurance coverage.
Unfortunately, it is not possible to remove the coverage for non-attorney personnel. As previously mentioned, it is built into the overall premium for the firm. Coverage is comprehensive, and anyone performing work on behalf of the firm is included in the firm’s premium.
What Else is Included in Legal Malpractice Coverage
A lot more is included in your firm’s malpractice insurance premium than you would think. As we covered earlier, all support staff is covered under a lawyers malpractice policy.
Additionally, all past, present, and future employees of the firm and the work that they have performed on behalf of the firm is also included.
Aside from who is covered, there are also many different types of events covered by malpractice insurance coverage. There is coverage for cyber, crisis events, supplemental payments, disciplinary and regulatory proceedings.
Also included in malpractice insurance are various services and resources, such as a risk management hotline and tools to protect your law firm. There is also free retirement tail coverage available after 3 consecutive years of coverage. While the cost of legal malpractice insurance can cause a bit of sticker shock, once you break down all that is included in a policy, it is easy to see the value.
Ways to Reduce The Cost Of Legal Malpractice Insurance
As a renewal account executive I often hear from attorneys that they are looking for ways to reduce the cost of coverage. Now, you might be in the boat where you're looking to reduce the number of support staff covered in order to reduce your premium. While that is not possible, there are several other ways to reduce your premium.
The best way to lower the cost of insurance is by implementing risk management protocols and procedures.
The use of engagement letters, disengagement letters, and a central docket system can all reduce the amount of risk you post to an insurance carrier. This is rewarded with a reduction in premium.
Legal malpractice insurance is a significant investment therefore finding ways to reduce the cost without sacrificing coverage is an important step when securing a policy.