While lawyers are used to protecting their clients from the harsher aspects of the law, many don’t take enough steps to protect themselves. If you are a practicing attorney, you might not have legal malpractice insurance, but it is a useful product to invest in. Getting malpractice insurance for lawyers means you are protected if you make a mistake or an angry client believes you have and files suit.
But malpractice insurance is a complex product with many types of coverage, endorsements, and clauses built into it. If you are thinking about getting malpractice insurance for lawyers, you might want to check out these frequently asked questions to better understand it.
- Am I Required to Carry Attorney Malpractice Insurance?
- I Work as In-House Counsel for a Company that Offers Coverage, Do I Still Need Malpractice Insurance for Lawyers?
- What Do ‘Retro Dates’ Mean in Attorney Malpractice Insurance?
- What is ‘Innocent Insured’ Coverage in Attorney Malpractice Insurance?
- What is ‘Tail Coverage’ in Attorney Malpractice Insurance?
- How Do I Determine How Much Attorney Malpractice Insurance I Need?
- Where Can I Buy Attorney Malpractice Insurance?
Am I Required to Carry Attorney Malpractice Insurance?
Only a few states require attorneys to carry legal malpractice insurance, such as Idaho and Oregon. Most states leave it up to the lawyer to decide whether or not to carry malpractice insurance.
Lawyers are required by many states, including California and Ohio, to inform clients that they don’t carry this type of professional liability insurance.
Still other states, such as Florida and Minnesota, require lawyers without malpractice insurance to inform their state bar association of this fact on a yearly basis.
>>MORE: Professional Liability vs. Malpractice vs. E&O Insurance: How Are They Different?
I Work as In-House Counsel for a Company that Offers Coverage, Do I Still Need Malpractice Insurance for Lawyers?
If the company you work for is your sole client and you don’t do any pro bono work or moonlight for other clients, then you may have adequate coverage through your employer. Most companies with in-house counsel will purchase something called, ‘Employed Lawyers Insurance’. This is simply malpractice insurance for attorneys who are employees of a larger company.
However, your company’s insurance may not cover work you do for other clients, pro bono work or work you did before getting hired at that company. Be sure to check with your company to see if you are covered in these cases to decide if you need additional professional liability insurance.
>>MORE: How Much does Professional Liability Insurance Cost?
What Do ‘Retro Dates’ Mean in Attorney Malpractice Insurance?
The term ‘retro date’ or ‘dates’ simply refers to a retroactive period to your current insurance coverage activation date. Sometimes, lawyers will purchase insurance with a retroactive date that covers work done for clients in the past to provide additional protection.
Retroactive coverage may be necessary for a few reasons; the lawyer didn’t have insurance when they were working during these periods, or they had insurance, but the previous policy no longer covers them. A retroactive insurance may also be called, ‘prior acts coverage.’
What is ‘Innocent Insured’ Coverage in Attorney Malpractice Insurance?
If you are part of a practice or an employer who hires in-house counsel, you may want to get legal malpractice insurance for attorneys with an additional ‘Innocent Insured’ clause. This clause is a common addition to legal malpractice insurance that is designed to provide coverage for companies and law offices.
Most insurance providers require lawyers to tell them about any previous acts that they could be sued over during the application process. The innocent insured clause means that law firm won’t lose their policy if one member of the firm doesn’t disclose a potentially pre-existing legal claim.
If that attorney is sued over the incident, this usually results in the insurance provider rescinding the policy, but the firm can point to the innocent insured clause saying they were kept in the dark about the prior claim. So, the law firm is able to keep their legal malpractice insurance coverage.
What is ‘Tail Coverage’ in Attorney Malpractice Insurance?
Although it’s called, ‘Tail Coverage,’ this is actually an extension of your last insurance policy with an ‘Extended Reporting Endorsement.’ When you leave a practice, and unable to work as a lawyer any longer, or retire, your existing legal malpractice policy will end. If you don’t purchase an extension you won’t be covered by malpractice insurance if sued later for a prior act. However, the tail coverage keeps your coverage active even in retirement.
Most insurance providers have strict rules for tail coverage, such as:
- Only providing a 30-day window to purchase the Extended Reporting Endorsement
- Not allowing coverage of work completed after retirement or injury
- No allowing you to increase the limits on your prior coverage
- Requiring lawyers to renew their Extended Reporting Endorsement every year or every five years
>>MORE: What is Tail Coverage in Malpractice Insurance?
How Do I Determine How Much Attorney Malpractice Insurance I Need?
It’s up to each person to decide how much coverage they require, but your insurance agent or broker can help you determine the ideal amount for your needs. It’s important to look at how much you are willing to pay in premiums and what level of risk is involved in your area of practice.
Generally, those operating in legal fields where clients can potentially lose large amounts of money on a failed defense or poor piece of legal advice will need a lot of coverage.
These high-loss areas of practice can include:
- Real Estate Law
- Corporate Organization & Securities
- Trusts & Estate Law
- Commercial Business Transactions
- Tax Law
- Plaintiff and Intellectual Property Law
For instance, if you work in corporate tax law and advise the client on a series of deductions that the IRS later denies and charges a fine over it could mean millions in losses for the client. If the client decides to sue, whether the case has merit or not, it could mean you are on the hook for a multi-million-dollar settlement.
Where Can I Buy Attorney Malpractice Insurance?
Many insurance companies offer attorney malpractice insurance across the United States. You can find a full listing of providers on the American Bar Association’s website. Or you can use a search engine to find legal malpractice insurance providers in your local town or state.
>>MORE: Top 5 Providers of Legal Malpractice Insurance & How Much It Costs
Final Thoughts:
There is a lot for the average lawyer to learn about legal malpractice insurance and being aware of what you are purchasing helps ensure you are protected later on. While many states don’t require the purchase of malpractice insurance for lawyers, it is a good idea to have coverage in case of a lawsuit too. This is especially important for attorneys practicing in areas of law where clients potentially lose hundreds of thousands or millions of dollars.
