Legal Malpractice 101: What You Need to Know


Legal Malpractice Insurance is Sound Risk Management

Ask any attorney about legal malpractice insurance and they will all agree it is a cornerstone of a sound risk management strategy. Most also acknowledge that at some point in the course of their career, they will encounter a claim or two. Mistakes and misunderstandings are a part of life. Malpractice allegation can costs thousands of dollars in defense costs that could put significant financial strain on a lawyer or firm.

What does legal malpractice insurance cover?

According to the ABA, legal malpractice is defined as any act which is negligent or wrongfully executed by an attorney who causes monetary damages to his/her client. Basic legal malpractice insurance policies are designed to provide coverage for claims that arise from “wrongful acts” committed in the rendering of legal services in your capacity as a lawyer.

Malpractice or professional liability insurance protects an attorney against a client’s claims of malpractice and pay the client if the attorney is found guilty of malpractice. Insurance depends on the field of law and position of the attorney seeking coverage, and may fully or partially cover liability and may explicitly list exclusions to coverage. Each firm needs to decide what options are most important to them in mitigating their risk.

When deciding on the appropriate legal malpractice insurance policy, here are some important considerations:

  • Prior Acts – This is the date after which losses may occur and be covered under the policy. Ideally, the prior acts date should be the initial date the law firm was formed.
  • Limit of Liability – The maximum amount the insurance company will pay for the coverage. Typically, limits are expressed as “per claim” and “aggregate”. Appropriate limit will need to be weighed against cost.
  • Deductible – The deductible is how much the firm will pay “out-of-pocket” in the event of a loss. Insurance carriers will vary in terms of the deductible allowed and the type of deductible options available. In some cases insurance carriers will offer a zero deductible option.
  • Claim Expenses – Usually claim expenses (e.g., reasonable fees, costs, and expenses charged by attorneys retained or approved by the insured for a claim brought against an insured) are included within the limit of liability. Some carriers will offer an option to provide claim expense payments in addition to the limit of liability with a maximum that is usually equal to the per claim limit of liability.

The Bottom Line

Choosing the right legal malpractice policy is one of the most important decisions you can make in developing your risk management strategy. Nielsen Professional Insurance Services will be with you every step of the way to determine the best coverage for your particular needs. Fill out our Request A Quote form now or call us toll-free at (877) 856-9231 for more information on our services.