How to Buy Legal Malpractice Insurance: An Ultimate Guide for Attorneys

Here’s a stark truth: Eighty percent of attorneys will face a malpractice claim at some point in their careers. Unfortunately, even if you do everything by the book, you could still be sued for malpractice by a dissatisfied client. Worse still, malpractice suits can cost thousands of dollars to defend.

That’s why you can’t risk practicing without legal malpractice insurance. Here, we’ll explore all the essentials you need to know when buying malpractice insurance.

Factors to Consider When Buying Legal Malpractice Insurance

Whether you run a small law firm or a large one, here are tips to keep in mind when purchasing attorney malpractice insurance.

Choose a Reputable Malpractice Insurance Provider

You can obtain legal malpractice insurance directly through licensed insurance agents, brokers, or insurers. However, some insurers aren’t licensed to provide malpractice insurance in certain states.

Fortunately, the American Bar Association (ABA) maintains a Professional Liability Insurance Directory where you can find reputable carriers offering malpractice insurance in your state.

Some legal bar associations also provide recommended carriers or even offer malpractice insurance at a discounted rate. For instance, the American Immigration Lawyers Association (AILA) has a malpractice insurance program exclusive to its members.

Vet Multiple Providers

When searching for a legal malpractice insurance provider, don’t settle for the first provider you come across, regardless of how excellent the deal sounds. Instead, request quotes from various providers and scrutinize them thoroughly.

Here are some crucial questions to ask when vetting providers:

• What is the policy period?
• What are the coverage terms?
• What is the insurer’s A.M. Best rating?
• What are the liability limits?
• What are the deductibles?
• Who is the ”Named Insured?”
• Is there a retroactive date for previous acts coverage?

These are just a few essential questions to ask before settling for a malpractice insurance provider. Check out the ABA’s comprehensive Checklist For Purchasers of Professional Liability Insurance for more questions. It’s an invaluable resource if you want to review potential providers before signing up for malpractice insurance.

Check the Coverage

The amount of coverage you require will vary based on various factors, including:

• The type of practice
• The firm size
• Risk exposure

While the coverage you need will vary based on these and other factors, ensure you get sufficient coverage. For instance, if you run a large firm with many attorneys, you’ll need higher coverage limits to protect yourself against multiple potential claims.

That said, here are some areas many legal malpractice insurance providers typically don’t cover:

• Prior acts coverage: This coverage offers protection from claims that arise before your policy takes effect but are reported during the policy period. It makes changing insurance providers hassle-free.

• Tail coverage: This coverage allows you to report claims for incidents beyond your policy period, even after your policy expires.

• Commercial liability insurance: Most attorney malpractice insurance provider’s policies won’t protect your firm from financial losses due to workplace injuries or property damage. You’ll need to purchase a separate policy or seek another insurer.

• Cybercrime: Cybercrime is rising, with nearly 30% of law firms reporting a cyber breach. Sadly, many insurers don’t provide cyber liability insurance. Ask potential insurers whether they offer cyber insurance before signing the dotted line.

Confirm When the Coverage Starts

Some attorneys assume that their legal malpractice insurance policy comes into effect immediately. However, this isn’t always the case.

As a result, taking on a case that leads to a malpractice claim before your policy’s effective date could be costly. So, don’t rush to take on a case before your coverage begins. Ascertain the start date of your coverage to protect yourself from potential malpractice claims.

Consider the Cost of Legal Malpractice Insurance

While cost isn’t the sole factor to consider when purchasing attorney malpractice insurance, it’s one you can’t overlook. When evaluating how much your premium will cost, insurance companies typically examine the following:

• Frequency: The number of claims your firm is expected to receive.

• Severity: The anticipated litigation costs and damages the insurer expects to pay depending on your area of practice.

Besides these factors, here are some other factors that may impact your firm’s malpractice insurance costs:

Location

Your firm’s location can have a significant impact on your premium costs. For example, if your firm is located in a busy metropolitan area like Manhattan, you’re likely to pay higher premiums than a firm situated in a suburban area.

Firm Size

The more lawyers your firm has, the higher your premiums will be compared to other industries where higher revenue results in higher premiums. Law firms are primarily evaluated based on the number of practicing lawyers and caseload.

Previous Claims

Your past and pending claims can have a massive impact on your premium costs. Generally, the severity of claims matters more to insurers than the volume. For instance, if you receive multiple claims but none are paid out, you won’t see a huge change in your premium costs. On the other hand, if you paid out a large claim, you’re likely to pay higher premiums.

Years in Practice

Your years in practice may also impact your legal malpractice insurance costs. New attorneys typically have lower premiums because of their lower case volume and, thus, lower risk. In contrast, experienced attorneys often have higher premiums.

Protect Yourself From Costly Losses With Malpractice Insurance

Sure, Oregon may be the only state that requires attorneys to carry legal malpractice insurance, but remember: Four out of five lawyers face malpractice claims at some point in their careers. If, like many lawyers, you face a claim, malpractice insurance can protect you from hefty losses.

When purchasing malpractice insurance, be sure to choose a licensed insurance provider, evaluate multiple providers, and understand the coverage limits and costs to ensure you pick a suitable provider.

Ready to protect your law firm from potentially heavy losses? Discover the benefits of working with an independent insurance agency, or contact us today to learn more about our legal malpractice insurance.