Why Should I Buy Professional Liability Insurance?
When making the decision to purchase professional liability insurance consider this: the average cost of a claim escalates every year. The endorsed lawyers’ professional liability insurance carrier of The Missouri Bar, The Bar Plan Mutual Insurance Company, recently released statistics that show the average cost of a claim closed with payment over the last decade is slightly more than $100,000. This amount does not consider lost billable hours to the attorney who is accused. An important point to ponder is that you may not even be the one accused of wrongdoing: if you practice with other attorneys, you are exposed to your partners’ risks.
The cost a lawyer could incur to defend a liability claim would most likely exceed the annual premium, and being sued for legal malpractice can result in a significant decrease in gross annual revenues. Purchasing malpractice insurance protects your livelihood and your clients.
What limits should I consider?
Recommended limits vary. In considering limits, ask yourself: “If I make a mistake, how much will the client be damaged?” How much you pay for your premium depends on many different things including your areas of practice and the limits of liability you choose.
How do I choose a carrier?
Professional liability insurance is a highly specialized area, so choosing a carrier should not be taken lightly. When deciding upon a carrier, do your research. Questions that should be answered before making your decision:
- How much experience does the carrier have in providing coverage to attorneys?
- Does the carrier have attorneys in the role of managing claims?
- Is the insurance carrier financially sound?
- How long have they offered professional liability insurance in your market?
- If a claim occurs, will you be represented by local counsel?
- Will your claims adjuster be a licensed attorney?
- Does the coverage follow the attorney or the firm?
In times of financial stress, many law firms seek ways to reduce or cut costs. It is important to note that price is a small factor to consider when evaluating the risks to law firms, and it should never drive the decision to change or choose a carrier. It is imperative that attorneys understand the policy and coverage issues, which can vary significantly from carrier to carrier, to ensure they are properly protected in the event of a claim.
You should be certain to understand the policy language and what coverage it provides. When comparing policies, pay close attention to the following provisions:
- Extended reporting coverage
- Prior Acts Coverage
- Coverage exclusions
- Defense of disciplinary matters
- Coverage for FDCPA claims
Research the financial rating of your insurance company or those you are considering. You can verify the insurers rating by financial rating services such as A.M. Best at www.ambest.com.
The Missouri Bar only endorses The Bar Plan Mutual Insurance Company (www.thebarplan.com). They provide broad legal malpractice coverage at the lowest possible price based on actuarial analysis, not market opportunity. All products and services offered by The Bar Plan Group of Companies are for the benefit of the legal community.
How do I get started?
To get started on the application process, The Missouri Bar recommends contacting The Bar Plan at 800-843-2277.
Additional information can be found at www.abanet.org/legalservices/lpl/home.html, which is the website for The ABA Standing Committee on Lawyer’s Professional Liability. They offer several guides for legal malpractice insurance.