Author: Kimberlee | December 2, 2024
Edited by: Kimberlee and Reviewed: Kimberlee
Lawyers offer a lot of advice when dealing with clients. With so much advice being given and so much legal precedence to shift through, it is possible that a lawyer will make a mistake. This is why professional liability insurance is so important. Lawyers’ professional liability insurance pays when claims arise from an attorney not providing correct advice or being negligent in some fashion.
By nature, the legal profession is very litigious. After all, that is the primary reason a client seeks help from a lawyer. With that being said, clients expect a lot from their costly lawyers, and if the lawyer fails, the consequence can be a lawsuit or complaint. This is why having professional liability insurance is so important. It pays when there is a dispute about a lawyer’s professional services. It is a crucial policy and may be required by the state bar for licensing,
Layers professional liability insurance is also called legal malpractice or errors and omissions (E&O) insurance. Its coverage kicks in when there is a claim that the lawyer was negligent, made an error or omission, or failed to meet obligations in some fashion. This type of insurance provides coverage when the attorney has a claim and will pay the settlement amount plus any legal defense needed in the case.
Policies can be either claims made or per-occurrence policies. A claims-made policy is one where the coverage exists for claims made while the policy is active. An occurrence policy will pay a claim with coverage continuing after the policy is canceled.
Claims against attorneys are common. For example, a client may say that the attorney misrepresented his chances of success, only keeping a case alive to collect more legal fees. The client may bring up a suit if they lose the case and want their attorney’s fees back. Keep in mind that clients can bring a claim up anytime, whether true or not, and the attorney needs to defend his position.
There are limitations of claims and exclusions in a professional liability insurance policy. These exclusions include:
A policy won’t cover an attorney in these cases. The attorney may cover the gap with another type of insurance or make practice adjustments to avoid issues.
There are policy limits that apply to a policy. These are stated in the policy as the maximum that a policy will pay out on a claim. It is important to note that the legal defense is not considered part of the policy limits and is above and beyond the limits paid in a claim. The attorney may also have a deductible, which is a portion of the claim that you must pay.
Lawyers should consider the benefits of getting a professional liability policy if they are not required to do so by state law. Those benefits include:
Professional liability insurance costs vary widely among attorneys. An average practice can expect to pay between $1,200 to $2,500 per year for a policy, with high-risk offices expecting to pay as much as $10,000 per year.
The factors that influence premiums include the location of the office, amount of coverage sought, claims history, and type of contract used when solidifying client relationships. Some locations, such as Los Angeles, are more prone to claims being filed compared to smaller areas, such as Ashland. The more coverage you elect, the more the policy will cost. And a firm with a history of claims will pay more than one with a clean claims history.
A law firm looking to get a policy and manage insurance costs will want to take a look at internal practices to lower costs. By ensuring that contracts explicitly state the work that will be done and the risk of case loss, the law firm can reduce the number of claims made against it. Fewer claims mean lower costs.
There are some factors to consider when choosing the right policy for your law firm. First, you want to determine the amount of coverage you need and then choose whether or not you want a claims-made policy or per-occurrence policy. These factors will directly impact the cost of insurance. When shopping for insurance, make sure to compare policies on the same terms. So if you get a quote for a $1 million dollar claims made policy, make sure the competitor isn’t quoting you for a $100,000 per occurrence policy. A good insurance broker will help you shop the policy around to get the best price for the maximum coverage.
Ethical attorneys understand that mistakes can happen, and having a policy in place protects everyone. Check with state licensing authorities to understand the minimum insurance requirements when it comes to professional liability insurance.
It is important to safeguard your law practice with a professional liability insurance policy on top of a business owners’ policy or general liability policy. This will ensure that you have the protection needed to handle any claim that arises.
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