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 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?
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 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.
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.