TLTR: When it comes to lawsuits, no one is safe, not even the best lawyers. You can be accused of negligence, malpractice, and erring at work by any of your clients. In this article, we discuss what lawyers insurance is, what it covers, and how much it costs.
Lawyers insurance, commonly known as legal malpractice insurance, is a combination of insurance policies designed to protect lawyers against legal jeopardy. It reimburses attorneys for the losses incurred through the legal industry’s various risks, malpractice lawsuits being the most common lawsuits in the industry.
If there is a lawsuit, there are legal expenses to pay whether you’re at fault or not. You still have to pay attorney fees and fight the case. The Connecticut General Assembly states that a client can file a malpractice claim against you up to three years after the alleged misconduct, so it’s worth it to be prepared.
Why do You Need Lawyers Insurance?
Lawyers insurance helps lawyers cover their losses and helps clients feel secure, plus it’s required in some states. For instance, lawyer’s liability insurance is a legal requirement in Oregon. In other states, firms need to notify their clients if they do not have insurance.
A good lawyers insurance policy can:
- Protect you against claims of ignorance or negligence
- Protect your staff against claims
- Increase your goodwill and build trust between you and your client base
Without proper coverage, you’re basically leaving yourself and your firm open to bankruptcy. If you believe your career deserves a cushion against heavy financial blows, lawyers insurance is for you.
What Policies Fall Under Lawyers Insurance?
Lawyers insurance packs many policies into one bundle. Although you may not need each coverage option listed below, an experienced insurance agent will tell you that the best coverage for you is one that covers all your vulnerabilities. Here are some policies you should consider:
Professional Liability Insurance
Professional liability insurance is one of the basic coverage options for lawyers. Your clients seek you out when they’re in dire need of legal guidance and advice. Sometimes your assistance works out, and sometimes it can go wrong. You never know when a disgruntled client might decide to file a lawsuit against you.
Professional liability insurance will cover you under such circumstances, whether or not your lawsuits ever make it to court.
Directors and Officers Insurance (D&O Insurance)
D&O Insurance protects you from legal cost coverage and attracts potential investors. Your law firm will benefit exponentially from this coverage.
Imagine you’re looking to expand and are seeking investors. Investors, of course, want to make profits and will look for the safest place to put their money. Companies who purchase the right policy reflect responsibility and safety. You’ll be attracting multiple investors in no time.
Business Owners Policy
A business owners policy (BOP) is designed to provide coverage for small and medium-sized law firms. It combines commercial auto insurance, general liability insurance, and business interruption insurance into one package. A bundled business owners’ insurance for lawyers provides protection for your law firm and saves money on insurance premiums. As per the Insurance Information Institute, since the insurance is designed for smaller-sized companies, firms with an annual income of less than $5 million and 100 employees or fewer are eligible for a BOP.
A BOP protects you against bodily injury, property damage, loss of business income, and loss of commercial property. If your employee falls and breaks their arm in the workplace and you’re not insured for it, you’re liable for their medical bills.
General Liability Insurance
General liability insurance provides coverage for bodily injury or property damage losses. You might be liable to pay for third-party damages if an accident happens during your work hours or on your firm’s property. If your client trips on the floor and falls at your place of business, a general liability policy will keep you covered.
Large firms require a separate general liability insurance policy included in their lawyers insurance package. But for smaller firms, general liability insurance can be combined in a BOP.
Commercial Property Insurance
Commercial property insurance provides protection to property owned by a business. It covers assets including hardware, electronic, or any other types of belongings. If you own an office building, commercial property insurance will protect you from named perils such as accidental fires, theft, and vandalism, among others.
Worker’s Compensation Insurance
Worker’s compensation insurance covers your employees when they suffer from an illness or injury due to work. This policy is crucial in lawyer’s insurance because fighting legal cases can be stressful and dangerous. According to a survey by the Bureau of Labor Statistics, in November 2019 there were around 66,100 workplace injuries and 4,400 workplace illnesses in professional and technical services.
Commercial Auto Insurance
Commercial auto insurance provides coverage to automobiles owned by a business. It also covers personal cars that are used for commercial purposes. As explained by Forbes, you can get a tax deduction when you use an automobile exclusively for business operations. If your employee gets in a car accident and their personal auto insurance is not sufficient to cover their losses, commercial auto insurance provides additional coverage.
Cyber Liability Insurance
Cyber liability insurance provides coverage for losses caused by cybercrimes. These losses can be from data loss, misuse of online data, theft, or malware. Cyber liability insurance covers both the direct and indirect costs of cybercrime. Also included are the costs related to lawsuits because of a data breach.
In 2011, Reuters reported that Sony’s PlayStation Network was breached by hackers and exposed the confidential information of 77 million user accounts. Not only did Sony incur a $2 billion loss, they also were not indemnified for any data breach claims, as hacking incidents were not covered by their commercial general liability insurance policy. As data breaches have increased in recent years, it’s important to have a cyber liability policy in your lawyers insurance package.
Commercial Umbrella Insurance
Commercial umbrella insurance will provide additional coverage to general and auto liability policies. If your employee gets in a car accident while on the job and is seriously injured, you are required to pay for their medical expenses. The expenses might exceed the limits of the policy in play, which can cause a substantial financial burden to your firm. In these types of cases, umbrella insurance comes to your aid.
Malpractice insurance covers professionals when a client sues them. This policy is also called lawyers professional liability insurance.
If a client sues you for professional errors, misjudgments, or malpractice, malpractice insurance will cover you. The American Bar Association states that a lawsuit for malpractice will be filed against four out of five lawyers once in their career.
Malpractice insurance for lawyers gives you the peace of mind to focus on your work and frees you from worries about bankrupting yourself if you make an honest mistake. If a client loses a case and sues you for negligence, malpractice liability will keep you covered.
Standard Exclusions of Lawyers Insurance
Not everything under the sun is covered by lawyers insurance. Some standard exclusions are:
Intentional fraud or criminal activities are excluded because these are uninsurable by law in general.
For example, your client files a lawsuit against you because they feel that you’ve misled them regarding a case. Furthermore, they’ve gathered proof of your inexperience and strong evidence that you’ve intentionally kept important things from them. In this case, your lawyers insurance will deny your claim.
Internal employee conflicts
Lawsuits for legal fights between the employees of the same law firm are generally excluded from the package. Internal conflict management systems can help in resolving such issues.
If a claim was expected before purchasing a policy, it’s not covered in the lawyer’s insurance. In some cases, the insurer might deny coverage even after advance notice.
Any perils except for named perils are excluded from the insurance package. Named perils are decided before signing the agreement for the insurance. Named perils generally include loss due to theft, fire and vandalism.
How Much Does Lawyers Insurance Cost?
The premium costs for lawyers insurance differ for every attorney. According to Alps Insurance, an attorney could pay up to $3,000 for a comprehensive lawyers insurance policy.
However, the risks for each law firm are different and the cost varies accordingly. The factors affecting the cost of insurance for lawyers are:
1. Past claims history
Have you been filing a claim for every small expense your insurance covers? Well, your insurance providers keep a record of all those past claims. When the time comes for renewals, you’ll be paying higher rates.
Do you live in a state where lawyers get sued every week? Your insurance rates will vary depending on where you live. Additionally, not all insurance providers may extend their services in your state. Available providers may or may not overcharge you.
If you agree to pay higher deductibles, your insurance company will graciously lower your insurance rates. A deductible is any amount of money you pay before your insurance claim payout starts rolling in.
4. Number of employees
If your law firm consists of less than ten employees, you’re going to pay a lot less on employment practices liability insurance and workers compensation insurance. Additionally, you’ll be saving money on general liability insurance.
The fact that you’ve studied and practice law cannot shield you from being sued. Even the best lawyers aren’t safe. Without insurance, your business could be filing for bankruptcy in case of expensive lawsuits. Even if your case doesn’t make it to court, settlement costs are usually higher than what the lawsuits are worth.
Insurance can help lawyers pay for lawsuits and settlement costs. Contact an insurance agent and cover your loss instantly. If you’re looking for local experts, find an agent near you in Agency Height’s insurance directory.
Did you find our article helpful? Leave a comment below to let us know!
Frequently Asked Questions
Do lawyers carry malpractice insurance?
It’s not mandatory, but we certainly recommend that you do! Currently, Oregon is the only state that requires practicing lawyers to carry lawyers insurance. However, it’s still good practice to keep your vulnerabilities in check. You never know when you might get slapped with an expensive lawsuit.
Practicing law without necessary insurance only puts your future in jeopardy. We recommend you purchase a custom-tailored legal malpractice insurance policy from an experienced agent.
What are the common causes of claims?
Some of the most common alleged causes of legal malpractice claims are negligence, inexperience, and failure to properly evaluate cases, among many others. Working with different kinds of clients comes with a multitude of risks. Some may find your advice helpful, while others may think differently. When mistrustful clients decide to sue you, lawyers insurance can be the shield you need.
Contact a local insurance agent to get the right coverage options.
Why is lawyers insurance so expensive?
Most lawyers skimp on the policy because they believe it to be too expensive. That couldn’t be further from the truth. A career in law isn’t easy; you’re fighting for people’s freedom, livelihood, and wealth. Your judgement and critical thinking are indispensable. One wrong move and your client could end up in jail.
If those clients decide to sue you, you could lose your life’s savings. Lawyers insurance is a much cheaper alternative.
January 30th, 2023 · 6.5 mins read
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