It seems counterintuitive that lawyers would need to source their own malpractice insurance. After all, do the people filing the malpractice suits really get sued themselves? According to small business insurer the Hartford, lawyers themselves can actually be sued for a number of reasons: claims of negligence, breach of confidentiality, administrative errors, missing filing deadlines, and professional misconduct. And as any lawyer knows, all it takes is a perceived error for a lawsuit to start. That’s why it’s so important to consider legal malpractice insurance.
- Top 6 Providers of Legal Malpractice Insurance
- What is Legal Malpractice Insurance?
- Types of Legal Malpractice Insurance
- How Much Does Legal Malpractice Insurance Cost?
- Is Legal Malpractice Insurance Required in All States?
- Does My Firm’s Malpractice Insurance Policy Cover My Pro Bono or Moonlighting Work?
- Do I Need Malpractice Insurance If I Join a Small Company as an In House Counsel?
- Legal malpractice insurance requirements by states
Top 6 Providers of Legal Malpractice Insurance
Below we’ve listed some of the top places to begin looking for malpractice insurance for attorneys. Because of the highly specialized nature of legal malpractice insurance, you may want to source it from companies that specialize in lawyer insurance. Finding a quote comparison site might be too general for an insurance type that is so tied into the type of law your practice handles.
- Coverwallet: Best for Comparing Quotes Online
- ALPS: Best for Variety of Products
- Aon Attorney’s Advantage: Specializing in malpractice insurance for lawyers
- Brunswick Companies: Risk management
- L Squared Insurance Agency: Helping you understand coverage
- biBERK: Well-rated company
CoverWallet: Best for Comparing Quotes Online
CoverWallet is a national insurance brokerage firm specializing in small business insurance. They work with several leading business insurance companies such as Chubb, Hiscox, the Hartford, Liberty Mutual, etc. and can provide you with several quotes online from these firms so that you can compare and choose the best quote for you. The quoting flow is relatively simple and fast. Within 10 minutes, you will be able to compare quotes from at least 3 leading firms.
In some cases, they might not be able to provide you with online quotes. However, you can call their customer service staff to get quotes. Their customer service staff are licensed agent, so every knowledgeable and well-trained. If you are new to buying legal malpractice insurance for your own, you should definitely call them to get educated on several nuances of different policies.
ALPS: Best for Variety of Products
ALPS advertises itself as “the nation’s largest direct writer of lawyers’ malpractice insurance.” In addition to professional liability, it also offers cyber response insurance and employment practices liability. In the site, you can either contact an agent or apply to get an in-depth quote. It also allows you to get a “ballpark estimate,” however that requires fairly detailed personal information and details about your practice.
Aon Attorney’s Advantage: Best Provider that Specializes in Malpractice Insurance for Lawyers
Aon Attorney’s Advantage specializes in malpractice insurance for lawyers. In order to get a quote, the site wants you to fill out an application.
Brunswick Companies: Best for Risk Management
Brunswick Companies is an insurance and risk management company that has been around since 1972. Legal malpractice insurance is just one of the products it offers. So you get both the insurance policy and risk management services. You can get a quote by filling out a request form.
L Squared Insurance Agency: Best for Helping Small Businesses Understand Coverage
L Squared handles a variety of business insurance products. In addition to legal malpractice insurance, it also has a business owners policy (BOP) product, cyber liability insurance and worker’s compensation insurance, as a few examples. Because it’s an agency, it can help you understand which are the best insurance products and coverage amounts for your situation. To start the process, you must fill out an indication form detailing your practice.
biBERK: Best for a Well-Rated Company
If you do want to look into a general small business insurer to compare rates, biBERK is a Berkshire Hathaway Company, one of the largest and most well-rated insurers in the market. It advertises that you can buy a policy and save up to 20 percent. For a quote, you must enter a valid phone number so a licensed agent can follow up with you.
What is Legal Malpractice Insurance?
You’ve probably heard of medical malpractice insurance or nursing malpractice insurance. Legal malpractice insurance is its litigation profession cousin. You might commonly see it referred to as lawyers professional liability insurance. It’s simply a type of insurance that protects lawyers when damages are claimed by the result of errors or omissions by the lawyer or colleagues.
For example, below are a couple incidents where this type of insurance is a must, in addition to the lawsuit reasons listed above:
- When a client is awarded less than they hoped after a case
- Errors made in applying statue or interpreting the law
In short, if someone claims damages because of a perceived error on the part of the lawyer, that lawyer could be sued.
Often these lawsuits can be quite damaging. As listed by insurer Aon Attorney’s Advantage, the average jury awarded $198,878 as part of legal malpractice suits and 22 percent of jury awards are over $1 million.
As such, you’ll often see coverage that runs in the millions. For instance, a plan may offer $1 million per claim and $3 million aggregate.
Types of Legal Malpractice Insurance
When looking for malpractice insurance for attorneys, it’s important to make sure you’re working with an insurer, broker or agency that can write a custom plan for your type of practice or law firm. For instance, Aon Attorney’s Advantage offers coverage for everyone from solo general practitioners to specialty firms that handle riskier cases. The higher the risk and the larger the firm, the more coverage you are likely to need.
Unlike other types of insurance, legal malpractice insurance tends to be offered on a claims-made basis. According to insurer ALPS, claims-made policies mean that claim has to be filed while the policy is in effect in order to be covered, versus occurrence where the event alone has to happen while the policy is in effect.
You may also see the term “retro date” on claims-made legal malpractice policies, which is usually the date after which the negligent act can happen. The American Bar Association gives the example that a policy period may run from Aug. 15, 2009, to Aug. 15, 2010, but have a retro date of Jan. 1, 2003. The claim has to happen during that one year of policy effectiveness, but the malpractice event can happen Jan. 1, 2003 or later.
How Much Does Legal Malpractice Insurance Cost?
Malpractice insurance for attorneys is another one of those insurance types where the cost can vary greatly based on a number of factors.
- Size of your law firm: larger law firms have higher rates
- Prior claims: a claims history can mean more expensive policies
- Coverage amount: this factor most directly affects premiums, since more coverage is more expensive to carry
- Deductible: higher deductibles mean lower premiums, since you’re paying a higher amount for coverage to take effect
- Length of time with a firm: premiums tend to increase the first few years a lawyer is at a firm because the lawyer amasses more cases and thus more risk – however, premiums tend to even out around the sixth year
- Location: denser populations can increase risk of claims and boost premiums
- Type of practice: some practice types naturally have higher risks attached to them because of their complexity, like securities or medical malpractice, which can increase premiums
- Risk management: in some cases, you could have lower premiums if you demonstrate that you have a risk management policy in place
L Squared lists some premiums as examples:
- Annual premiums can run $300 to $500 for a new attorney in a low-risk practice.
- Average costs run around $1,200 to $2,500 per year.
- Higher risk attorneys can pay $3,000 to $10,000 per year.
Attorneys and lawyers practicing in the areas of practice of medical malpractice, intellectual property, oil and gas, class action, mass tort, securities, and even mergers and acquisitions are considered high-risk. These are the areas of practice that have something called claims severity, ie. these claims usually results in large settlement amounts. Medical malpractice claims, patent mistakes, and patent infringement are typical in these high-risk areas of practice. Many carriers actually refuse to underwrite policies in these areas. If they do, they often offer lower coverage with higher premiums.
Is Legal Malpractice Insurance Required in All States?
Unlike medical malpractice insurance which is required in all states, legal malpractice insurance isn’t required, except Oregon where all practicing attorneys are required to have a malpractice policy. However, many lawyers and attorneys still choose to have a malpractice insurance policy to protect themselves from law suits. It may be necessary given it is estimated that 5-6% of all attorneys are sued each year due to malpractice.
However, more and more states require attorneys to disclose to their clients if they do not have legal malpractice insurance. Help Abolish Legal Tyranny (HALT) group has successfully lobbied for disclosure laws in 26 states, including Alaska, Ohio, New Hampshire, California, Colorado, Washington, South Dakota, Delaware, Virginia, Nebraska, and North Carolina, etc.
If you are a new solo practitioner, you may want to become insured to protect yourself.
Does My Firm’s Malpractice Insurance Policy Cover My Pro Bono Work or Moonlighting?
You definitely need to check with your managing partner if the firm’s policy covers your pro bono or moonlight work. Don’t assume that it does. If you work for your own firm as a solo practitioner, you need to check with your insurance agent when you are buying malpractice insurance.
Do I need Malpractice Insurance If I Join a Small Company as an In House Counsel?
There is a special policy for inside counsel. You need to check with your employer. You may also want to discuss with a malpractice insurance agent or broker to get their advice. This coverage is usually referred to us “Employed Lawyers Coverage”. It may not cover your work in pro bono or moonlighting capacity.
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
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. We recommend that you work with a national broker specializing in small business insurance such as CoverWallet or Simply Business. They will allow you to compare quotes from leading insurance companies in one place. If you need to learn more about different types of business insurance that you may need and the necessary coverage, their agents are very knowledgeable and can help explain everything to you.
Business insurance for law firms: Requirements, coverage, and costs
If you run a law firm with a few lawyers, paralegals, and assistants, in addition to legal malpractice insurance, you may also need the following coverages:
Cyber liability insurance or data breach coverage: Cyber attacks have become more and more popular. Law firms handle a lot of sensitive and confidential data and information of your clients. Just one data breach incident incident, it may bankrupt your business. Data breach coverage or cyber liability insurance will protect you and your law firm from these cyber attacks and data breaches. Learn more at the best data breach insurance companies and the best cyber insurance companies.
If you have employees, even just one, regardless full time or part time, you will need workers comp insurance coverage for your employees. It is required by state laws in all states, except Texas. As a solo self-employed lawyer, you also need to have workers comp insurance as well. It pays for medical costs, lost wages, disability benefits, death benefits, and more in case you or your employees get injured or become ill at work.
Learn more at the best business insurance companies for law firms.
Legal malpractice insurance requirements by states
Most states do not require lawyers and attorneys to have legal malpractice insurance. However, many states requires lawyers and attorneys to report if they have it or not. Different states have different requirement details when it comes to legal malpractice insurance. Make sure you study your state laws carefully before making the final decision to buy or not to buy your legal malpractice insurance coverage. Below are the requirements of legal malpractice insurance by states:
The following 22 states do not have any requirements for lawyers and attorneys to have legal malpractice insurance: Alabama, Arkansas, Connecticut, Georgia, Indiana, Iowa, Kentucky, Louisiana, Maryland, Massachusetts, Michigan, Mississippi, Missouri, New York, North Dakota, Oklahoma, South Carolina, Tennessee, Utah, Vermont, Wisconsin, and Wyoming.
The remaining 28 states either require the lawyers to report to clients or other offices whether they have legal malpractice insurance or not, or to notify clients if they carry less than a certain coverage limits on their legal malpractice insurance policy. The details are as follows:
|Alaska||Must notify clients if less than $100/$300 (or no coverage).|
|Arizona||No minimum limits – requires certification whether insurance is carried or not|
|California||Not required to carry; required to report to client whether they carry coverage|
|Colorado||Not required to carry; required to report to Colorado Supreme Court Attorney Registration Office whether they carry coverage|
|Delaware||No minimum limits – requires certification whether insurance is carried or not|
|Florida||Not required to carry; required to report whether insurance is carried or not|
|Hawaii||Not required to carry; required to report to Hawaii State Bar Association whether they carry coverage|
|Idaho||Required to carry limits of $100,000 per occurrence and $300,000 as an annual aggregate|
|Illinois||Not required to carry; require attorneys who do not carry malpractice insurance to complete a four-hour interactive, online assessment of the operations of their firm|
|Kansas||Not required to carry; required to report whether insurance is carried or not|
|Maine||No minimum limits – requires certification whether insurance is carried or not|
|Minnesota||Require attorneys in private practice whether they carry professional liability insurance and the name of the provide|
|Montana||No requirement; Lawyer Referral Service attorneys do agree to carry coverage|
|Nebraska||No minimum limits – requires certification whether insurance is carried or not|
|Nevada||No requirement; Bar site shows whether attorneys do/don’t have coverage|
|New Hampshire||Required to disclose if firm has no coverage/less than $100k/$300k in coverage. Must let clients know if coverage is terminated or if coverage drops below $100/$300|
|New Jersey||Not mandated for private practitioners. Limited Liability firms must carry $100k (multiplied by No. of Attorneys). Required to register evidence of the coverage carried.|
|New Mexico||Not required. Inform client if no coverage in place or less than $100/$300k|
|North Carolina||No minimum limits – requires certification whether insurance is carried or not|
|Ohio||Must notify clients if less than $100/$300 (or no coverage).|
|Oregon||Required to carry $300k through Professional Liability Fund (PLF)|
|Pennsylvania||Firms must notify clients if they carry less than $100/$300 (or if coverage drops below this at any time)|
|Rhode Island||No requirement except if the attorney is practicing in a corporation, LLP, or LLC.|
|South Dakota||Disclosure required on letterhead if they have no malpractice insurance of if coverage is less than $100k per claim|
|Texas||LLPs are required to have $100k if they do not set aside this amount to satisfy judgements. Otherwise, no requirements to carry or inform clients|
|Virginia||No minimum limits – requires certification whether insurance is carried or not|
|Washington||Not required to carry; required to report to WSBA, whether they carry coverage|
|West Virginia||PLLCs required to carry $1M. No requirements otherwise. Disclosed on state bar site for each attorney.|
Here is the source.
Legal Malpractice Insurance in Wisconsin
In 2018, the statute of limitations for tort claims of legal malpractice in Wisconsin was shortened from six years to three years. Great, you think! I can finally stop worrying about Troublesome Client X, whom I represented four years ago. Not so fast. Since the attorney-client relationship is recognized as a contractual relationship, Troublesome Client X can technically sue for breach of contract, for up to six years.
There is also some leeway as to when a tort claim can be filed. All of this means you need to keep your records on file for at least six years, and if a client was problematic, it’s a good idea to keep them longer.
Legal Malpractice Insurance in Colorado
Colorado lawyers in private practice are required to report to the Supreme Court about whether or not they have legal malpractice insurance. Note that actually having malpractice insurance is not required, but you do need to report it annually. Even though about 15% of Colorado lawyers in private practice don’t have any legal malpractice insurance does not mean it’s a good idea. As a lawyer, you should know anyone can get sued.
Legal Malpractice Insurance in Florida
You’re not required to carry legal malpractice insurance in Florida, but you are required to report whether or not you have it every year. And Florida not only has an abundance of sunshine, they also have an abundance of lawsuits. It used to be on the list of judicial hellholes, but Florida fell off the list in 2019, due to tort reform. However, this might come as news to residents of Florida, who have a reputation as being very litigious, especially for personal injury cases.
Legal Malpractice Insurance in California
California is second on the American Tort Reform Association’s (ATRA) list of the top 10 Judicial Hellholes. Part of the reason for this is because California created new laws regarding whether someone was or was not an employee (as opposed to just calling them independent contractors), to protect gig workers at companies like Uber, Doordash, Instacart, etc. These laws may be a good thing, but they opened themselves up to endless wage and hour lawsuits, thus ranking it as a judicial hellhole.
All of it is to say if you are an attorney or a lawyer in California, you should seriously consider having proper legal malpractice insurance.
Legal Malpractice Insurance in Alabama
Alabama attorneys are not required to carry malpractice insurance (most states don’t require it—if you’re curious, see the table of legal malpractice insurance requirements by states above.
Alabama isn’t super litigious, but it’s still a good idea to protect yourself with a proper legal malpractice insurance.
Legal Malpractice Insurance in New Jersey
New Jersey is the other “Judicial Hellhole” on this list, according to American Tort Reform Association. New Jersey is number ten on the list, mostly due to high-profile lawsuits against Amazon and other behemoths. Also, you can get sued for anything in New Jersey—some middle school teacher got sued just for telling a baseball player to slide into third base. So, yes, you need to be careful in New Jersey. If you are practicing in New Jersey, it is a good idea to have sufficient legal malpractice insurance coverage.
Legal Malpractice Insurance in Maryland
Plaintiffs in Maryland who want to sue an attorney need to show three things:
- The attorney was working as your lawyer
- They neglected a reasonable duty
- The client suffered as a result of that neglect
Since you are a lawyer, you should know that this fairly subjective language can result in years of litigation. There is a three-year statute of limitations, but there is also some question about when the statute begins (when you were hired? During the initial consultation? After you cashed the first check?).
Legal Malpractice Insurance in Arkansas
Attorneys in Arkansas are not required to carry legal malpractice insurance. However, since at any given time, about 5% of practicing lawyers are being sued for malpractice, you should consider protecting yourself. Arkansas is in the bible belt, so the state skews conservative, but most people are friendly and love to talk to pretty much anybody. However, that doesn’t mean they won’t sue you.
Even lawyers themselves can get sued if someone claims damages due to an error or omission on their part. That’s where legal malpractice insurance can help protect against these claims. Prices can go from hundreds to thousands per year, depending on a number of factors. Because malpractice insurance for lawyers is so specialized, it pays to shop around with companies directly.