Legal Malpractice Insurance: 5 Steps to Getting It
Most attorneys will have to defend themselves against malpractice allegations at some time in their careers, according to the American Bar Association.
Four out of five attorneys, according to the American Bar Association, will have at least one malpractice lawsuit throughout their careers. There is also an increase in insurance claims the frequency of new legal malpractice claims has risen in 2019, according to insurance broker Ames & Gough. A growing number of them exceeded $50 million in cost. So, you need to be sure you have legal malpractice insurance before you start working.
Even while attorneys can work on tools and practices to reduce the likelihood of malpractice claims, obtaining insurance for when things may go wrong is vital to your law firm’s financial health. In the United States, only Oregon requires legal malpractice insurance. Other nations need lawyers to carry insurance coverage before they may practice law in their jurisdictions.
Even if you are not obliged to obtain professional liability insurance, it doesn’t always mean that you should. It may be cheaper to not have legal malpractice insurance, but it is more costly in the long run. In certain jurisdictions, if a lawyer is practicing without malpractice insurance, either their clients or regulators must be notified that they are doing so.
Having no insurance might have a negative influence on your capacity to keep clients. Uninsured attorneys are not in high demand. The financial future of your legal company is also at risk if you don’t have insurance.
Even if you win the malpractice case, your legal firm’s financial resources might be depleted. However, it’s a good idea to get insurance before you take on your first client to protect yourself.
Legal Malpractice Insurance: 5 Steps to Getting It:
A few things to consider while purchasing malpractice insurance.
Find a reputable legal malpractice insurance company.
In most cases, professional liability insurance companies are limited to a single jurisdiction. A legal malpractice insurance company that covers claims in your state or province must be located. The Attorneys Insurance Fund of British Columbia and LAWPRO are two examples of mandatory legal malpractice insurance for Ontario lawyers.
When it comes to legal malpractice insurance, lawyers in the United States may have additional options. There is a Professional Liability Insurance Directory maintained by the American Bar Association that allows attorneys to find malpractice insurers in their state.
Legal malpractice insurance companies may be listed or recommended by state, municipal, and practise area bar organizations. There is a member benefit arrangement between the New York State Bar Association and USI Affinity that offers a discount to the Bar’s members.
There’s also the Lawyers Malpractice Insurance Program offered by the American Immigration Lawyers Association, which is exclusive to its members.
Be aware of the date on which your coverage begins
Never accept a case without first procuring professional liability insurance for your firm. Legal malpractice insurance should have a defined commencement date. It’s a common blunder for attorneys to begin legal work at their new law practice before the insurance begins.
You’re putting yourself in danger if that case leads to a malpractice claim, and if one does, your insurance company will point out that it’s not covered by your policy. Do not engage in an attorney-client relationship with a potential client until your insurance plan is signed and activated if you are starting a law practice. Do not get into an attorney-client relationship with a potential client until after you have signed and activated an insurance policy for your legal practice.
What your legal malpractice insurance coverage covers are essential.
When obtaining legal malpractice insurance, it’s especially crucial to pay attention to the terms of the policy. A law firm’s professional liability insurance may not cover the following four areas:
Before the acquisition of your current policy, would your insurer pay claims for professional activities? In most cases, unless there’s a clear clause that says they will, most insurance won’t cover it.
Will your coverage cover claims pertaining to pro bono services or voluntary legal work performed by an individual? Unfortunately, many insurance policies do not cover these activities.
There is a lack of business liability insurance among most legal malpractice insurers. As a general rule, law firms will need to seek out separate insurance to cover risks such as workplace accidents.
A growing number of insurers transfer the risk of data breaches to their policyholders as a result of law firms’ increasing use of technology. A ransomware phishing email may cause your data to be corrupted, and your legal malpractice insurance may not cover the harm.
Verify with your insurer what cybersecurity protections are included in their coverage and clarify whether you need a separate policy for that risk.
When applying for legal malpractice insurance, be selective.
Not all applications for malpractice insurance should be submitted. Many insurers need attorneys to fill out lengthy forms in order to get a quotation.
Applications may be used as a guarantee or representation of the insurance policy contract. In the event that you submit a hastily completed application, you may be charged additional fees. It’s also possible that certain actions will be removed from future coverage altogether.
Do a comprehensive investigation of insurers and send applications or quotations solely to the top competitors. Insurance companies may ask the following questions:
How many different types of law do you practice in your current position?
Have you been a lawyer for a long time now?
Does another insurance cover your current cases?
What questions should you ask potential insurers?
What are the deductibles for the insurance policies?
Do future recruits or independent contractors immediately fall under malpractice coverage?
Are all legal services done by the company covered by insurance?
Be ready to deal with a claim for legal malpractice insurance.
Megan Zavieh, a lawyer whose company defends lawyers in disciplinary matters, advises, “Notify your malpractice carrier immediately.”
“It doesn’t matter if you think the claim is valid or not; if a customer files a claim, you must inform your carrier. Insurance companies may refuse to cover a claim if you fail to disclose it in a timely manner.” Your carrier will advise you whether or not you need to seek legal advice once you’ve been told.
They’ll also advise you on how to reduce your client’s losses and how to figure out what went wrong.