If you want a long and successful legal career, professional liability insurance is just as important as landing new clients and winning cases. Before you begin to practice law, you need to purchase a comprehensive professional liability policy, understand its details and limitations, and take steps to minimize your legal risks.
Why You Need Professional Liability Insurance
As malpractice claims against attorneys continue to increase, monetary protection from lawsuits is one of the most important reasons to obtain liability insurance. This isn’t the only advantage that it gives you, though.
Benefits of Liability Coverage
Professional liability insurance policies are designed to protect you from financial devastation. Coverage kicks in when a current or former client files a claim accusing you of wrongful acts that hurt them in some way. The terms of each policy vary, but liability coverage can do the following for you and your practice:
- Provide peace of mind during everyday tasks
- Relieve your anxiety after claims are made
- Ease the financial burden of settlements and judgments against you
- Minimize the time and money you must spend to defend yourself
- Protect your clients from significant financial losses
- Allow you to protect the interests of your clients as you deal with claims
Common Causes of Legal Liability
No attorney is perfect. Even if you practice excellent risk management techniques, you may make a minor mistake that results in a claim. You may also take on clients who file groundless claims after receiving disappointing results. Some common causes of legal liability claims include:
- Simple administrative errors
- Breach of fiduciary duty due to conflict of interest
- Improper abandonment of a client
- Failure to address a client’s legal needs
- Inaccurate legal advice
What Your Policy Covers
The risks covered by liability insurance include acts committed while providing legal services to your clients. Every policy is different, but there are some general rules that apply to most professional liability policies.
Covered Legal Services
Liability insurance isn’t limited to the actions you take to represent your clients in criminal and civil cases. You also need liability insurance if you provide any of the following legal services:
- Giving legal advice
- Serving as a notary public
- Mediating legal disputes
- Directing or representing a legal professional association
- Representing a client’s estate (i.e. acting as executor or trustee)
- Acting as a title agent
Coverage Exceptions
All uncovered activities and errors will be outlined in your policy, but they may include the following:
- Fraud
- Crimes
- Dishonest or malicious acts
- Bodily injury
- Property damage
- Errors known but not reported until claims were filed
How to Handle Liability Claims
Even after your policy is in place, you must take certain steps to ensure that each liability claim is actually covered.
Reporting Requirements
As soon as you learn about a new claim, you must report it to your insurance provider. Failure to report may void your coverage and leave you with a huge financial burden. You should also report any errors or acts that increase your likelihood of a future claim.
Retroactive Claims
Your insurance may not cover every claim made during your policy period. If your alleged wrongful acts took place before coverage took effect, you may or may not qualify for legal defense and financial protection. Continuous coverage is crucial to prevent this.
Legal Representation
After a claim is made, your insurance provider will assign your case to a claims handler and appoint a malpractice defense attorney to represent you. Consultants may also step in to navigate highly specific claims.
What Affects the Cost of Insurance
A variety of factors will affect the overall cost of your insurance policy. Some attorneys need more coverage than others, so make sure you find a policy that works for your budget, risk factors, and types of legal services.
Coverage Needs
How much can you afford to spend on liability insurance? How much can you afford to pay before coverage kicks in? What area of law do you practice? Your professional liability agent or broker will help you weigh these factors and figure out the amount and type of coverage that’s right for you and your practice.
Factors that Affect Your Premium
Your area of practice will help determine the price of your insurance premium, which reflects your likelihood of facing a claim and the average amount of possible claims.
Determining the Right Deductible
You’ll always need to pay a certain amount of money before your insurance covers the rest. Of course, this amount is higher when premiums are lower, and vice versa. Weigh all risks and budget constraints to determine the right deductible for you.
How to Secure Your Coverage
The process of selecting and obtaining coverage can be time consuming. Make it easier by learning the legal terms that will appear in each policy, and consult experts for help.
Terms to Know
Some legal terms to know include:
- Full prior acts coverage—includes previous services rendered
- Retroactive date provisions—excludes wrongful acts taken before a certain date
- Discovery provisions—incident reporting requirements to trigger coverage before claims are filed
- Claims made and reported—all claims that are filed against you and reported to your insurance company within the required reporting period
- Extended reporting periods—available at an additional cost, these allow you to report claims after the expiration or cancellation of your policy
Obtaining the Policy
Consult your local bar association to see if they offer any liability policies that are specifically designed for new attorneys. You may also consider a third-party administrator to help you compare rates, choose the right type of coverage, and complete the application process.
Protect Your Legal Practice & Career With Professional Liability Insurance
As you consider different providers and policies, make sure you understand all the possible benefits of professional liability coverage, the various acts that lead clients to make claims, and the restrictions and requirements that apply to your policy. Your professional reputation and financial security may depend on the legal protection of professional liability insurance.
