Professional Liability Insurance for Legal Malpractice

Managing a law practice is a business. Like any business, the business of law is rife with risks. One risk is the prospect of a disgruntled client suing you for professional malpractice. Even if the client has no case, the reputational and economic cost of a legal malpractice action can be heavy. To insure against this risk, attorneys and law practices often get legal malpractice insurance. However, thinking about malpractice insurance coverage as a means to mitigate risk raises several important issues.

Should I get Coverage?

Yes. As a solo or small practitioner, the first, obvious question is whether a malpractice insurance policy is necessary for your practice. After all, there is not a line of clients waiting outside your door for your services, and the silence of your office telephone attests to this fact. So, you may be tempted to overlook or intentionally avoid getting a malpractice insurance policy for your practice. Don’t.

Beyond the obvious wisdom in having malpractice coverage, the long answer to this question depends on the jurisdiction in which you practice. Some jurisdictions have a mandatory coverage requirement, while others leave the decision up to the lawyer. A third group of jurisdictions leaves the decision up to the attorney, but requires a written disclosure informing a prospective client of the fact that the attorney does not carry coverage at the onset of an engagement. Whatever jurisdiction you find yourself in, getting a malpractice insurance policy is a smart choice.

This is especially the case nowadays. Ready access to information and popular TV shows like "Law and Order" and "Boston Legal" have enhanced clients’ knowledge and awareness of legal value, leading to a greater demand for better value with a correspondingly narrower margin of error. The current economic downturn and market competition have compounded this phenomenon. Therefore, and despite best efforts, the modern client may be more likely to repudiate an attorney’s final work and sue for professional malpractice.

For this reason, commonsense requires that you insure your practice and your personal assets against legitimate and sometimes frivolous malpractice claims.

Having a malpractice insurance policy in place:

• Protects you against claims of professional negligence
  
• Protects your staff and associates
  
• Provides you with the peace of mind to focus on other aspects of your practice
  
• Could provide your practice with a means to outsourcing risk management
  
• Builds client confidence in your practice, thus legitimating your practice
  
• May fulfill your ethical and professional obligations
  
• Might cover the cost of having independent legal counsel represent you in an ethical complaint.

What is the Cost?

Annual premium for a malpractice insurance policy varies. But, in all likelihood, the outlay for malpractice coverage will not be your most significant expense. Still, and perhaps because of the obvious benefits, a legal malpractice insurance policy can be pricey, particularly for a small or solo practitioner. The cost of an annual premium will depend on several factors including the policy provider, your practice area, the number of years you’ve been in practice, the size of your practice, and your geographic location.

For instance, securities and real-estate lawyers may expect to pay higher premiums as these fields are considered "high-risk" areas. So too will a recent Bar admittee when compared against an attorney with decades of experience, or a practice located in a location with high malpractice claims as oppose to one situated in locale with no such reputation.

Another factor that heightens your risk profile for purposes of malpractice coverage is the size of your law practice. Generally, large firms pay less in insurance premium per insured than small or solo practices. Some providers even offer steep premium reductions for firms with a large number of attorneys.

Are There Any Deals Out There?

Yes. Despite these various determining factors, some of which may be out of the attorney’s control, there are discounts to be had. Membership to various voluntary and state bar associations come with discount offers on malpractice insurance premiums. Some of these offers can be significant. In addition, many companies offer discounts to newly admitted attorneys and are even amenable to special pricing breaks for small or solo practitioners.

However, because premiums varying from one provider to the next, the key to getting the best price and value for your money is to begin your search for a policy early and from a large pool of companies. Do not wait until your existing policy expires or is about to expire to start shopping.