Professional Liability Insurance for Attorneys

Professional Liability Insurance: The Dangers of "Going Bare" 

When you look at the cost of professional liability insurance coverage for attorneys, do you ever ask yourself "Do I really need it?"

Dealing with the Cost of Professional Liability Insurance

The cost of professional liability insurance represents a significant expense for emerging law firms. It can be tempting to forego insurance while building a practice.

The truth is few firms can afford not to be covered.

The dangers are highest for small firms, who often lack the staff and resources for the duplicative procedures and best-in-class technology that provide optimal protection from calendaring errors, conflict-of-interest identification, and other common problems.

It is important to remember that malpractice claims can be made regardless of whether the lawyer is truly negligent, and cannot always be foreseen. One claim can wipe out years of work in building a successful practice, as well as the personal assets of the attorney.

Recent cases we have encountered illustrate the real and significant risk faced by every law firm: 

• When the vehicle involved in the death of a young girl was crushed by the tow yard before it could be secured as evidence, the family sued their attorney for damages due to loss of action, claiming the lawyer’s failure to act swiftly resulted in the loss of crucial evidence.
  
  
• A firm was retained to represent defendants in a civil suit. The jury returned a judgment of almost $500,000. After exhausting all appeals, the defendants sued their lawyers for failure to represent them with “reasonable care, skill and diligence.”
  
  
• The law firm retained to represent the wife in a divorce action a decade ago negotiated an agreement for spousal support. Five years later, the husband retired and petitioned for modification of support. The wife “discovered” that prior representation was “negligent” and sued her attorney.
  
  
• A firm signed a contingency fee agreement to represent a client in a false imprisonment suit. After researching case law, the attorney advised the client his situation did not meet the requirements for a successful suit. The client found a new attorney who initiated a $75,000 claim against the prior law firm, claiming the first attorney had negligently allowed the statute of limitations to expire and provided incorrect advice regarding the chance of success.
  

What can you do to protect your firm from the dangers of a “going bare”? 

• Objectively evaluate whether your firm has the time and experience necessary to research the best methods of minimizing your exposure and minimizing the financial impact of any claim.
  
  
• Carefully consider your ability to absorb the impact of potential claims upon your practice and your personal assets when deciding upon the level of coverage you prefer.
  
  
• Utilize an experienced broker who specializes in professional liability, with access to a wide range of insurers. Industry contacts can make a difference in securing the best price.
  
• Investigate premium financing options. The ability to spread out premium payments over the course of the year may improve your ability to secure protection.