Professional Liability Insurance: What Does it Cover and How Does it Protect Your Practice?
By Jack Witherspoon, Senior Associate Product Manager at Mercer
Most legal matters are 10% law and 90% facts. If an attorney knows the law inside and out but fails to learn all the pertinent facts of a case, they are not adequately representing the client's interests. This would, in turn, provide the client with legitimate grounds to sue for malpractice. That’s just one example of the many common “errors and omissions” that lead to malpractice claims regularly. Others might include missing a critical deadline; drafting a contract with inconsistent or conflicting provisions; failure to communicate with a client; and negotiating a settlement too soon. One seemingly minor slip-up could put you at risk. The point is clear: No matter how well you do your job, you cannot eliminate the risk of being sued for malpractice. As you well know, your profession is held to high standards, and failure to meet those standards — in the eyes of clients, at least — could make you the target of legal action. Professional Liability Insurance can play a huge role in protecting you financially when that happens.
Cover legal costs and payouts
Professional Liability insurance is sometimes referred to as “Errors & Omissions (or E&O)” insurance or simply malpractice insurance. This type of coverage is critical to any reputable law practice, no matter what you call it. Statutes and The State Bar rules mandate malpractice insurance for certain firms. Also, in California, liability insurance is needed to participate in a lawyer referral service.
Professional Liability helps cover legal costs and payouts that arise from claims brought against you, based on the rendering of, or failure to render, professional services as an attorney. It protects your firm against claims alleging: • Errors or oversights in your work • Professional negligence or failure to meet a client’s expectations • Breach of contract • Failure to deliver a promised service on time Some malpractice insurance plans have special benefits tailored for the needs of attorneys, such as protection against cyber-crime liability, assistance with earning MCLE credits, access to free legal research, and attorney support resources. Insurance carriers typically offer various limits of coverage and deductible packages. The minimum coverage limit offered by most carriers is $100,000 per claim/$300,000 annual aggregate, but higher limits are available. The average deductible is $5,000.
What malpractice insurance does not cover
It’s also important to be aware of the types of errors and omissions that are excluded by professional liability insurance. For instance, a typical policy will not cover: • Illegal acts • Purposeful wrongdoing • Bodily injury your business causes (general liability policies typically cover that) • Employee injuries or illnesses (which are usually covered by Workers’ Compensation) • Discrimination or harassment claims from employees Professional liability insurance is based on a claims-made structure. That means coverage must be in effect when a claim is made. If your coverage lapses, you are no longer protected and, if you buy a policy after a claim is made, you will not be covered for that claim.
Protect Your Reputation
For the sake of your legal career and everything you’ve worked so hard to achieve, professional liability insurance is a prudent investment. Ultimately, having coverage can bring peace of mind and give you a greater feeling of confidence when doing your job. The bottom line is, you’ll have the financial means to protect your professional reputation and keep your practice viable.
Jack Witherspoon has over 35 years’ of experience in the Professional Liability Insurance marketplace. He has developed his skills as a Carrier Underwriter, Program Manager, and National Sales Manager. Learn more about the State Bar of California Sponsored Professional Liability Program at mybarbenefits.com.