Do I really need Malpractice Insurance?
Do you wonder if you really need legal malpractice insurance when you open your law practice? Even if your practice is small and you are extremely diligent in your work or you work in an area where ‘everyone knows everyone’ and you believe that your clients would never sue you, consider the following:
- An estimated 4-17% of lawyers are sued each year.
- Lawyers have a 50% chance of having a claim or disciplinary complaint brought against them at some point in their career.
- Of all reported malpractice claims, 70% are made against firms with fewer than five attorneys.
- An error free engagement does not protect you from a legal malpractice claim.
As a leading provider of legal malpractice insurance for over 40 years, we have seen thousands of claims against attorneys. Claims can be bucketed into two main categories:
- Claims where a mistake was made and
- Claims where no mistake was made
The majority of claims are in the latter category. In fact, according to the 2012-2015 ABA Profile of Legal Malpractice Claims, only 13.24% of all claims resolve with a payment to the plaintiff either by settlement or trial.
However, mistakes can be made. Many times these errors are correctable, but sometimes they cause damage to your clients. Even if the client does not seek all of your personal assets as compensation for their loss, your professional reputation can take a hit.
While considering malpractice insurance, think about the cost of just one frivolous claim. Legal fees alone can easily add up to well over a lifetime of insurance premiums, as studies have shown that lawyer malpractice claims are becoming more and more expensive to defend. With the costs of legal fees and time away from your practice, malpractice insurance makes sense.
Malpractice Insurance pays for an objective defense attorney, professional support and advice to help you through an undoubtedly challenging and stressful situation.
The annual cost of insurance can be extremely affordable and can provide many benefits. Key aspects of a typical Westport Insurance Corporation (Westport) legal malpractice policy include the following:
- Westport policies provide coverage (defense and indemnity) for a claim of malpractice as well as the cost of defending disciplinary complaints up to $20,000.
- Westport policies have additional coverage for subpoenas, pre-claim mitigation, cyber breaches, defense income reimbursement for trial attendance, and crisis management expenses.
- Westport malpractice policies are written on a “claims made and reported basis” with “prior acts” coverage. This means that the policy in place at the time the claim is made will respond as long as the act that gave rise to the claim occurred on or after the policies “prior acts” date. A new policy will carry a “prior acts” date equal to the policy inception date and that date remains constant throughout subsequent renewals. This differs from your typical homeowners or auto insurance policy where the claim falls under the policy that was in existence at the time of the accident. Therefore, it is important to establish coverage early and maintain it without any gaps as a mistake you made years ago will generally be covered under your current policy.
- Westport policies provide coverage for negligent mistakes made by non-attorney employees.
- Westport policies provide free coverage after you retire if you have been insured continuously with any carrier for three or more years at the time of your retirement (two years of continuous coverage in the event of disability and no minimum years of coverage required for “tail coverage” in the event of death).
- Westport provides free risk management services, including hotlines, newsletters and continuing legal education courses.
Without insurance, who would you call for advice? How would you fund your defense? How would you indemnify your client should you make a mistake that causes them to suffer a financial loss? So the question is not “do I need insurance” but “how can I afford to practice without it?”
©2017 Swiss Re. All rights reserved. This article is intended to be used for general informational purposes only and is not to be relied upon or used for any particular purpose. Swiss Re shall not be held responsible in any way for, and specifically disclaims any liability arising out of or in any way connected to, reliance on or use of any of the information contained or referenced in this article. The information contained or referenced in this article is not intended to constitute and should not be considered legal, accounting or professional advice, nor shall it serve as a substitute for the recipient obtaining such advice. The views expressed in this article do not necessarily represent the views of the Swiss Re Group (“Swiss Re”) and/or its subsidiaries and/or management and/or shareholders.
Insurance products underwritten by Westport Insurance Corporation, Overland Park, Kansas, a member of Swiss Re Corporate Solutions.