What Types of Insurance Do Attorneys Need?
July 23rd, 2021 by admin
Attorneys are typically well-versed in insurance meant to protect clients. However, lawyers themselves need insurance to protect them from many issues that can arise while practicing law. Lawyers are subject to malpractice lawsuits just like doctors. In this case, lawyers need professional liability insurance to protect them should a professional issue emerge with a client.
Professional liability insurance covers professionals who provide expert service in their fields. Lawyers fall into this category because they provide crucial aid to clients whom they serve. However, just like all humans, law professionals sometimes make mistakes.
In some instances, a client may suffer due to a mistake made by their attorney. Professional liability insurance covers lawyers and keeps them and/or their firm from being personally liable for any financial hardships that may befall their clients due to professional mistakes or negligence.
Know What Professional Liability Insurance Covers
Professional liability insurance is also known as errors and omissions (E&O) insurance. That phrase is a good indicator of what this type of insurance covers. Lawyers can get sued over a variety of things. It is critical that solo practicing lawyers and private law firms are protected in the event of a suit.
Professional liability insurance covers the following mistakes that might arise in a law professional’s career:
- Delayed or misfiled paperwork: Lawyers may miss paperwork deadlines or neglect to file important documents with the court.
- Inadequate investigation: Lawyers may fail to provide clients with sufficient council.
- Professional misconduct: Lawyers may behave in ways that harm their clients, such as committing fraud or failing to receive proper client consent.
- Alleged conflicts of interest: Lawyers may fail to disclose when their judgment can be skewed by other professional or personal interests.
- Breaches of confidentiality: Lawyers may disclose private information that is protected under attorney-client privilege.
All these common complaints boil down to professional negligence. Lawyers need protection from allegations of professional negligence because, when lawyers make mistakes of this nature, their clients can suffer great hardships.
For example, if a lawyer fails to follow appropriate instructions, conduct thorough investigations, or provide adequate legal advice, a client can potentially lose their case or run into serious financial trouble. In this case, professional liability insurance protects the lawyer from owing damages or negative professional consequences.
Professional Liability Insurance Does Not Cover Everything
Coverage can vary depending on the policy and insurer. Policies cover common professional mistakes, but they typically exclude intentional harm or physical damage.
Common policy exclusions include:
- Dishonest, malicious, or criminal acts
- Issues regarding law services provided to entities owned by the lawyer or law firm
- Bodily harm
- Property damage
- Regulatory or statutory penalties
- False advertising
- Conflicts between two parties covered under the same liability insurance policy
- Workplace disputes
While bodily harm and property damage are not covered under professional liability insurance, these instances are generally covered under commercial general liability insurance.
Injuries that occur on the job are covered by workers’ compensation insurance. A law firm will likely also have employment practices liability insurance, which will cover employee disputes like wrongful termination, discrimination, and sexual harassment claims.
No insurance policy will cover false advertising. A lawyer falsely advertises when they lie about their education or exaggerate work history. In this case, the lawyer would not be protected.
When Is Professional Liability Insurance Required?
Only two states currently require privately practicing lawyers to have professional liability insurance. However, all lawyers and law firms should have coverage with an insurance policy to protect them from devastating lawsuits.
If a lawyer or a law firm is sued, legal fees and negative media attention can add up to serious financial hardships. These can bankrupt a lawyer or law firm if they are required to pay fees, damages, and penalties personally. Professional liability insurance can prevent these harsh financial consequences.
Many states that do not require lawyers to carry professional liability insurance have implemented disclosure requirements. In these 24 states, privately practicing lawyers must disclose each year whether they have professional liability insurance coverage.
In some states, lawyers are actually required to disclose to their clients if they do not carry a professional liability insurance policy. Disclosure is the ethical means of letting a client decide the best route to take when choosing legal counsel.
While it may not be outright required for most lawyers, law firms may require their lawyers to be covered. Law firms usually provide this kind of insurance that covers their practicing lawyers. Legal professional liability insurance is necessary for lawyers to practice law ethically and effectively. Professional liability insurance is affordable, and there is no good reason to go without it.
Do Law Firms Provide Professional Liability Insurance?
Generally, lawyers employed by a law firm will be covered under the firm’s own professional liability insurance. However, it is important to make sure, as a lawyer, that you are included in your firm’s policy. If you find that your firm’s policy is not inclusive enough, you have the option of purchasing your own professional liability insurance coverage so you will be adequately covered.
- Ensure you are included as an official employee of your law firm. Not all lawyers affiliated with a law firm will be included under the firm’s insurance policy. You should be absolutely certain where you stand in regard to your law firm’s professional liability insurance coverage.
- Find out what your law firm’s policy limits are. As mentioned above, you may find that your law firm’s professional liability insurance is insufficient. You can supplement your own policy alongside your firm’s policy to reach a level of coverage with which you are comfortable.
- Make sure you know what your deductible is under the law firm’s policy. Determine whether you are responsible for your deductible in the event of a suit or if your law firm will pay the deductible.
Some professional liability insurance policies cover retired attorneys. In this case, a retired attorney may face a lawsuit based on a professional mistake made in the past when the lawyer was still practicing. If your professional liability insurance covers retirees, you will be covered in this instance. However, if your policy does not cover retired lawyers, you could be on the hook in the future, regardless of how much time has passed.
How Much Does Professional Liability Insurance Coverage Cost?
Professional liability insurance premiums may vary dependent on the insurance company’s appetite for the risk.
As with all insurance plans, professional liability premiums will cost different amounts depending on their level of coverage. For lawyers, premium costs also vary depending on a lawyer’s specific area of practice. The following areas of law are considered high risk and, therefore, carry more expensive policies:
- Real estate law
- Plaintiff’s personal injury
- Entertainment law
- Securities law
These areas are considered high risk because they usually see the most lawsuits.
The price of professional liability insurance can also depend on how long a lawyer has been practicing. New lawyers typically have lower premiums because they have not been in practice long enough for negligence to be discovered. Veteran lawyers who have been practicing for more than 10 years receive more claims than young lawyers, so their premiums are more expensive.
Even the most expensive premiums are worth having. Claims against professional liability insurance can be in the millions of dollars, so a substantial policy is a good investment.