Understanding Malpractice Insurance for Lawyers
As a lawyer, malpractice insurance should be a top priority. It protects you financially in case a client sues you for negligence or improper conduct.
Without it, your entire career and assets could be at risk over a single lawsuit.
Malpractice insurance, also known as professional liability insurance, covers the costs of defending a malpractice claim, as well as any damages awarded to the plaintiff.
When shopping for a policy, consider the coverage limits and exclusions, deductibles, and premiums. Higher coverage usually means a higher premium. Exclusions can leave you vulnerable, so review them carefully.
You’ll also need to determine if you want “claims-made” or “occurrence” coverage. Claims-made only covers claims made during the policy period, even if the error occurred earlier.
Occurrence covers any claim arising from an error whenever it occurred, even after the policy lapses. Occurrence is usually more expensive but provides better long-term coverage.
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Types of Lawyer Malpractice Insurance Policies
Lawyers have a few options when it comes to malpractice insurance.
The two most common types are claims-made and occurrence-based policies.
Claims-Made Policies
Claims-made malpractice insurance coverage applies to claims filed during the policy period, regardless of when the alleged malpractice occurred. Premiums are usually lower than occurrence-based policies. However, if you switch or cancel your policy, you lose coverage for any claims from past work. You can purchase “tail coverage” to extend reporting periods for past claims.
Occurrence-Based Policies
Occurrence-based malpractice insurance covers you for alleged malpractice that occurred during the policy period, regardless of when a claim is filed. Premiums are often higher, but you're covered even after canceling the policy. This “peace of mind” coverage ensures any claims from past clients can still be covered.
Some lawyers opt for a hybrid policy that combines occurrence and claims-made coverage. For example, an “occurrence-reported” policy covers claims reported during the policy period for occurrences up to a specified retroactive date.
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Top Tips for Choosing the Right Malpractice Insurance Policy
When it comes to protecting your law practice, malpractice insurance is a must. But with so many options out there, how do you choose a policy that’s right for you?
Here are some tips to guide you:
1. Consider your area of practice
The risks associated with different types of law vary greatly. If you handle higher-risk cases like medical malpractice or class actions, you’ll want more coverage.
2. Compare policy limits
The limits of a policy determine the maximum amount the insurer will pay out for any single claim. Higher limits mean greater protection but also higher premiums.3. Check coverage exclusions
Make sure any policy you consider covers the work you actually do. Some may exclude certain practice areas like securities law or patent prosecution. Watch out for vague or overly broad exclusions that could leave you exposed.
4. Consider your assets
The amount of coverage you need depends not just on your practice but also your personal assets. If you have significant assets you want to protect, you'll want higher malpractice insurance limits.
5. Compare premiums
Policy premiums vary between insurers based on the level of coverage and limits. Shop around at different companies to find a policy that gives you the protection you need at an affordable price.
6. Review policy provisions.
Pay attention to details like who qualifies as an insured, coverage for past acts, extended reporting periods, and consent to settle provisions.
Make sure you fully understand all parts of a policy before purchasing. Your malpractice insurance is meant to protect you, so choose a policy tailored to your unique needs and practice.
