Some FAQ About Legal Malpractice Insurance
The public and prospective clients assume lawyers have the requisite amount of legal expertise, and the ability to apply such expertise correctly when retained to handle client matters. When lawyers make mistakes, they may be sued for any damage or harm caused by their misfeasance. Legal malpractice insurance helps lawyers protect themselves from covered lawsuits that accuse them of making errors.
When shopping for legal malpractice insurance, a wise course of action is to contact at least three carriers and compare costs, deductibles, coverage limits (per claim and aggregate), as well as other coverage terms.
Here are some frequently asked questions and answers about legal malpractice insurance.
Are some areas of practice at greater risk than others?
Yes. Some of the higher risk practice areas typically include transactional law involving securities and intellectual property. Other higher risk areas include trusts and estates, plaintiff’s personal injury cases, and real estate loan modifications, a newly emerging area.
Most insurance companies consider patent work a high-risk area of practice within the realm of intellectual property law. These carriers consider the applicant’s percentage of time devoted to patent work, the level of experience, and the risk management procedures in place when considering an application for legal malpractice insurance.
In the trusts and estates area, a higher risk of potential liability exists because non-client beneficiaries have standing to sue for malpractice under certain circumstances, and the statute of limitations may not begin running until the client’s death, which may not occur until several years after the preparation of the estate plan.
Plaintiff’s personal injury cases present a risk from failing to properly calendar deadlines and accepting clients who unrealistically expect their cases to be worth more than they factually are.
In the area of loan modifications, the potentially high volume of clients and strict, voluminous government regulations make it a higher risk.
Where do I find legal malpractice insurance?
The insurance regulatory authority in each state in which legal malpractice carriers write coverage license these insurers. One resource of information about legal malpractice insurance carriers is the Insurance Information section of the website of the ABA Standing Committee on Lawyers’ Professional Liability.
The website includes a non-exhaustive directory of carriers by state with a link provided in each company name. This link provides a description of the essential features of that company’s standard policy features, including the size of firms covered, coverage limits, and other coverage terms.
Lawyers considering a solo or small-firm practice should look for carriers who feature policies for firms with as few as one lawyer. The Insurance Information web resource also contains resources that offer tips for first-time shoppers for insurance, such as the “Checklist for Purchasers,” and articles on “Costs” and “Coverage Gaps.”
Is an agent or broker necessary to purchase malpractice insurance?
The answer to this question depends on the insurer. Some insurers are happy to work directly with attorneys, yet, others will only accept business through an agent. The important point is to find the right coverage and the right company for the practice.
May I acquire malpractice insurance if only working part-time? If so, how will it differ from full-time coverage?
Most carriers do provide some form of coverage for part-time attorneys, but some may exclude certain areas of practice, or require other restrictions or limitations by endorsement.
How much malpractice insurance do I need?
The answer to this question is different for every lawyer and dependent upon the number and types of cases that the lawyer accepts and the potential amount of damages and defense costs if a malpractice claim should arise. One obvious consideration is the nature and extent of a lawyer’s business and personal assets, since, if found guilty of malpractice, the attorney’s personal assets are potentially subject to collection under a judgment.
How will a claim be paid?
Malpractice policies “deplete,” meaning the fees and costs for the lawyer’s defense are paid from the limit available for the claim. Lawyers who have a relatively low limit ($100,000, for example), may not even have enough available to defend the case through trial and thus leaving nothing to satisfy a potential judgment.
Attorneys can help the poor and unfortunate who cannot fight solely by themselves. They can help parents fighting for custody of children. Law school provides the tools necessary to practice law, which is serving clients. The CDTA provides both the hard and soft skills that attorney-advocates require to meet the needs of clients in the 21st Century. At CDTA, we train, educate, and develop students to be exceptional attorneys and trial advocates. Call us today at (760) 342-0900 or find out more online here.