by Jeff Thompson, Sales Agent
In a busy law firm, errors can occur, and sometimes a claim arises even without an error being made. Despite best efforts and intentions, clients can be upset with an attorney’s work and claim malpractice. This is why lawyers’ professional liability insurance, or malpractice insurance, is one of the most important insurance coverages a law firm can carry. It can pay for the cost to defend malpractice claims, as well as any settlements or judgments that may result.
Attorneys have various reasons for not carrying coverage and the impact can be severe. According to the 2018 Legal Malpractice Report by the Missouri Department of Insurance, the average payment on a closed claim was $116,945. This is in addition to the costs to defend the claim. Thus, a malpractice claim, baseless or not, can cost thousands of dollars causing a lawyer or a small firm financial hardship. Having adequate malpractice coverage reduces the time and money attorneys must expend to defend these claims, which allows them to concentrate on the practice of law.
For those who are considering starting a firm or joining a new firm, be aware of inadvertently leaving a gap in coverage. Pay attention to the details in the policy. Look for a “retro-date” which limits coverage to acts or omissions occurring on or after that date. Also look for language in your new policy that limits coverage only to legal services performed on behalf of the insured firm. If your policy has a retro date or the “on behalf of” restriction, you do not have career coverage, leaving you vulnerable to future liability.
On average, 1 in 10 attorneys will be sued for malpractice. Malpractice insurance is important for all attorneys, but should be especially considered for those practicing in areas of the law with a higher frequency for claims (Plaintiff’s personal injury, Estates and Trusts, Family Law and Collections) or in areas of law that tend to generate complicated and expensive claims (Securities, Intellectual Property, Complicated Business Transactions). It provides peace of mind to the firm and its attorneys, and helps ensure your clients will be made whole when a mistake is made.
The potential for malpractice claims is a fact of life for attorneys and, as history has shown, there is an increased frequency of claims during economic downturns. Obtaining or maintaining comprehensive malpractice insurance is essential, and remains a best practice as it protects attorneys and their clients.
The Bar Plan is here to help lawyers build a better practice. In addition to malpractice insurance, we offer related insurance products, risk management and practice management services, education, and practical resources. We know that it is a trying time for small firms struggling through the Coronavirus Pandemic, and therefore The Bar Plan is offering up to 15 hours of free CLE for the 2019/2020 reporting year.