Though lawyers are hired to protect and defend members of the public, they also need their own protection. Unfortunately, giving professional advice and offering legal defense to clients comes with a host of potential risks and plenty of opportunities for costly mistakes. That’s why it’s so important to work with an independent insurance agent to get set up with the right attorney business insurance for you. But first, here’s an in-depth guide to this absolutely critical coverage.
Liability Insurance Considerations for Lawyers Who Own Their Own Practice
Lawyers who own their own practice need a special form of coverage called legal professional liability insurance (errors & omissions insurance, or “E&O” coverage). Professional liability insurance protects legal practitioners from damages caused by professional mistakes, like malpractice. Legal claims against attorneys can be extremely costly, both financially and in terms of damaging their reputation.
With a professional liability policy, the insurance company agrees to cover ramifications stemming from bad advice or improper procedures. It’s crucial for law firms to equip their practice with the right protection. Legal claims and lawsuits filed by clients can be not only embarrassing and tragic, but also expensive to the point of potential bankruptcy.
How to Tell if Your Law Firm Provides Enough Liability Coverage
Attorneys who work for a law firm need to make sure the business offers them adequate protection against potential errors. To determine this, lawyers should ask the following questions:
- If they’ll be considered insured under the firm’s policy: Different professional liability policies have rules in place about who is considered to be an insured worker at a firm. Lawyers may have to be considered a true employee of a firm to be covered under the provided professional liability coverage. Some lawyers are only loosely affiliated with various law firms, in which case they would not be covered under the company’s policy, and would have to get their own separate coverage.
- What the policy’s limits are: All lawyers should be up front and ask what kind of coverage limits their firm’s professional liability insurance comes with. If the coverage limits are inadequate, the lawyer may choose to supplement with their own policy. While minimum limits on professional liability policies in many states are either $1 million or $3 million, certain states allow for lower legal coverage minimums.
- What the policy’s deductibles are: Lawyers also need to inquire up front about the firm’s provided coverage’s deductible amounts, and if they are required to pay this amount themselves. If the deductible seems too high, a lawyer may opt to purchase their own coverage instead.
- If the policy covers retired attorneys: Sometimes professional mistakes are uncovered after several years have passed, and the lawyer can still be sued even post-retirement. Not all professional liability policies sold to law firms offer coverage for retired attorneys, so it’s important for attorneys to find this out well in advance of planning to retire.
For attorneys who have further questions or still need help determining if the law firm they work for offers adequate coverage, an independent insurance agent can help.
Why Do Attorneys Need Protection?
While offering legal advice and defense, unfortunately lawyers aren’t immune to making professional errors. Lawyers are sued for malpractices of all kinds by their clients. In fact, four out of five lawyers will be sued for professional negligence during their lifetime of their career. The vast majority of these claims, or at least 70%, are filed against small firms or private practices.
The following are common reasons lawyers get sued:
- Professional misconduct: Also known as any behavior by the attorney that fails to protect the health and safety of their clients.
- Administrative errors: This includes losing important paperwork and other documents that could be extremely costly mistakes for both attorneys and their clients.
- Breach of confidentiality: Also known as disclosing personal/private data or information to a third party without the client’s consent.
- Negligence: This includes failure on the attorney’s part to conduct an adequate investigation, submit important court documents, or offer correct professional advice, etc.
- Missed deadlines: When attorneys fail to submit lawsuits on time, it can cause the court to dismiss the case entirely, which can be an extremely costly mistake in many regards.
While lawyers are prone to making mistakes just like anyone else, these professional errors can cost them far more than just the trust of their clients. Without adequate professional liability coverage, lawyers stand to lose money, future business opportunities, and even their firm. Fortunately, an independent insurance agent can get you equipped with all the protection you need.
What Does Professional Liability Insurance Cover?
Professional liability coverage is designed to protect attorneys against damage caused by professional negligence. Coverage takes care of legal and court fees, and potentially will pay to prevent any negative media attention, as well. Due to the extremely risky nature of legal work, lawyers need a policy that addresses any unintentional harm done by them to their clients.
This specialized form of E&O insurance is meant to protect legal practitioners in the event they cause harm to their clients in ways not relating to bodily injury or property damage. An independent insurance agent can help equip your law firm or your solo practice with the right professional liability coverage to protect against costly lawsuits.
What Does Professional Liability Insurance Not Cover?
While professional liability insurance provides coverage for many potential sources of harm by attorneys, it doesn’t cover everything. While exclusions may vary by policy, there are a handful of commonly non-covered perils under professional liability insurance, including:
- Intentional harm
- Regulatory/statutory penalties
- Employee dishonesty
- Bodily injury
- Property damage
Bodily injury and property damage are covered under commercial general liability (CGL) insurance, so they’re not included under professional liability, aka E&O insurance. If you’re concerned that your business is lacking in any area of protection, an independent insurance agent can help you get set up with all the coverage your law firm or solo practice needs.
What Are the Benefits of Professional Liability Insurance?
Due to the risky nature of their work, attorneys absolutely need the right protection. There are a couple of major benefits to professional liability coverage policies, including:
- Protection against professional errors/negligence: As a professional offering a service to the public, there’s always potential to do unintended harm. In the event a case is filed against a lawyer claiming they’ve misrepresented their client or offered bad advice, a costly lawsuit could easily arise. Having the right coverage is crucial to help avoid huge potential fees needed to sort ugly legal matters.
- Protection against liabilities not covered under CGL insurance: Commercial general liability insurance is designed to protect businesses from legal costs relating to accidental/unintentional bodily injury/harm or property damage to their clients. Professional liability insurance extends coverage to other areas of unintentional harm, including giving bad advice or misrepresenting a client in a way that results in other forms of injury/upset or damage.
Having adequate liability coverage for your law firm or solo practice is crucial. Because of the risks involved in the nature of their work, attorneys need coverage to protect both themselves and the public. Causing unintentional harm is tragic enough to begin with, but with the right coverage, it doesn’t have to mean financial ruin.
How Much Does Professional Liability Insurance Cost?
It really depends on the size of your specific law firm, how many clients you serve, the type of services you offer, and the potential risk you have of doing professional harm to the public. Lower-end policies might cost $1,200 annually for lawyers who deal in less risky areas, while higher-end policies for attorneys specializing in high-risk areas might easily cost $10,000 or more per year. Your independent insurance agent can help fill in the blanks.
Benefits of an Independent Insurance Agent
Independent insurance agents have access to multiple insurance companies, ultimately finding you the best coverage, accessibility, and competitive pricing while working for you. Find a TrustedChoice.com independent insurance agent in your community here.
TrustedChoice.com Article | Reviewed by Paul Martin
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