Why Attorneys Should Never Practice Without Malpractice Insurance

When you start practicing on your own, or join a small firm, there will be countless concerns you have as you get started. You have to worry about finding clients, retaining clients, handling mounds of paperwork, and navigating the nuances of the local court. With so much to do, and the mounting costs to do it all, it’s easy to want to cut something out to meet your overhead expenses. To cut costs, you may have decided to either reduce coverage to the bare minimum, or even forego malpractice insurance altogether.

Do not make this mistake.

Malpractice insurance can cover you in the most common professional liability suits that you’ll encounter while practicing law, and can make sure you have the financial resources to continuing practicing even after you’ve been pulled into a disagreement with an unhappy client. Every year, thousands of attorneys are sued for malpractice, and almost all  of those claims are lodged against solo practitioners or small firms. 

Your goal is to practice law, and malpractice insurance will make sure your goal stays a reality.

What Does Malpractice Insurance Really Cover?

Your malpractice insurance will cover errors and omissions committed by you in the course of performing your professional duties. If you’ve been overworked and make a mistake, or are improperly accused of making one, your malpractice insurance will cover most, if not all, of your defense. This includes typical malpractice events, including:

• Failure to know the law: Failing to know the law, including using incorrect or overturned case law, is one of the most common types of malpractice claims. If you’re just starting out your law practice, or recently switched to a new area of the law, you’re more at risk than others for a malpractice claim of this type.

• Missing a filing or service deadline: Missing a filing service or deadline can have serious implications for your clients, and is more common than any attorney would like to admit. Whether you have multiple people handling the same case, or you put something in your calendar wrong, there are many circumstances that can cause you to miss a critical deadline.

• Using incorrect or overturned case law: Similar to not knowing the law in the first instance, if you file a brief or other legal paper that uses incorrect or overturned case law, you could be staring down the barrel at a malpractice claim from a client.

• Strategy errors: While less common and more difficult to prove, a disgruntled client may allege that you committed malpractice by failing to come up with a competent case strategy.

Legal practices are busy, and the law is constantly evolving. This means that mistakes can happen.

But there’s no need for one mistake to be the end of your practice. Malpractice insurance will be there for you if an unexpected issue arises, providing you with the financial wherewithal to keep moving forward in your career.

What Will My Attorney Malpractice Insurance Cost? 

This question comes back to every lawyer’s favorite answer: it depends.

Several key factors affect the cost of a policy, including claims history, practice area, insurance limits, and location. Your annual premiums will also change based on the amount of coverage you want to purchase. So, while some attorneys in low risk practice areas, like insurance defense, can obtain insurance for as little as $500 a year, attorneys in high risk areas like securities litigation and class action defense should expect premiums closer to $3,000-$5,000 per year.

With the potential exposure you could face for a claim, malpractice insurance is well worth the cost. And if cost continues to be a concern, you can adjust the amount of coverage you select to get a more affordable premium.

How Much Attorney Malpractice Insurance Coverage do I Really Need?

Now that you’re inclined to get coverage, and know that it’s possible to get some coverage at an affordable rate, your next concern is how to determine the amount of coverage you need. Is $100,000 enough, or do you really need that $5,000,000 policy? At LCK Insurance Agency, we don't write malpractice policies for under $1,000,000, and we always encourage an umbrella policy to further protect your interests. 

The amount of coverage you should get turns primarily on the type and volume of cases you handle. For example, if you’re drafting routine rental lease agreements, your potential exposure is much less than if you’re filing patents for major biotech companies. With the latter, a mistake could result in significant damages and defenses costs if your client decides to file a claim against you. You’ll want a much higher claim limit to make sure that your insurance can cover any costs that may arise as you defend yourself in litigation.

Luckily, you can tailor the amount of insurance you purchase to your specific situation. Policies will allow you to have either, and most often both, a limit per claim, or an aggregate limit for multiple claims in a policy period. This means that you could have a $1,000,000/$5,000,000 limit, so that you have coverage for up to $1,000,000 on any single claim, and $5,000,000 in the aggregate for all claims against you.

We’ve thrown some example numbers at you, but we understand that knowing the exact coverage limits you may want can be confusing. You don’t need to figure all of this out on your own. The right insurance agents have a deep understanding of the different coverage needs for certain practice types, and can help navigate you to the correct policy.

How Leap | Carpenter | Kemps Insurance Agency Can Help

At Leap | Carpenter | Kemps Insurance Agency, our agents have decades of experience counseling solo and small firm attorneys through their malpractice insurance needs. We can advise you on the coverage that will best protect you and your practice. We’ll also get malpractice insurance quotes from multiple carriers so that you can receive the best price for the coverage you need. Let us take care of the insurance hassle for you so that you can get back to focusing on practicing law.