Most lawyers will face malpractice claims at some point. In fact, according to the American Bar Association, four out of five lawyers will have at least one malpractice claim during their careers.
The severity of insurance claims is increasing—according to insurance broker Ames & Gough, legal malpractice insurers saw an increase in claim severity in 2022 . Those claims included larger claims with costs increasingly over $50 million.
In other words, you need to make sure you have legal malpractice insurance . While attorneys can focus on tools and processes to minimize the risk of malpractice claims , having insurance for when things may go wrong is essential for the financial health of your law firm.
Not every jurisdiction requires lawyers to carry professional liability coverage to be allowed to practice. For example, New York does not require that a lawyer carry malpractice insurance. Oregon is the only state in the US to require legal malpractice coverage.
Many jurisdictions in other countries require a lawyer to have an insurance policy before they are allowed to practice. However, the fact that you are not required to have professional liability insurance does not mean that you can simply proceed without it.
Not having legal malpractice insurance may be penny-wise, but pound-foolish. Lawyers without malpractice insurance may be required to notify either their clients or regulators if they are practicing without insurance. This means that not having insurance could impact your ability to retain clients. Who wants to hire an uninsured lawyer?
More importantly, proceeding without insurance also puts the financial future of your law firm in jeopardy. A malpractice claim could easily deplete your law firm’s fiscal resources—even if you prevail against the claim.
So, are you required to carry malpractice insurance as a lawyer? No. However, it is prudent to have insurance before you accept your first client.
Here are a few tips to keep in mind when buying malpractice insurance.
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Most professional liability insurance providers are jurisdiction-specific. You need to find the legal malpractice insurer authorized to provide coverage against claims in your state or province.
This is an easy task for lawyers in Canada—each province has its specific legal malpractice insurer. For example, Ontario lawyers are required to purchase legal malpractice insurance from LAWPRO and British Columbia lawyers purchase from the compulsory Lawyers Insurance Fund .
However, lawyers in the US have more choices when it comes to selecting attorney malpractice insurance.
The American Bar Association maintains a Professional Liability Insurance Directory that lets attorneys see insurers that handle malpractice claims available in their state. State, local, and practice area bar associations may also have lists or recommendations for legal malpractice insurance providers.
For example, the New York State Bar Association (NYSBA) has a member benefit program with USI Affinity , offering a discount to the Bar’s members. There’s also the American Immigration Lawyers Association’s Lawyers Malpractice Insurance Program , offered solely to their members.
Tip: Professional liability insurers may have relationships with tools you already use. The largest direct writer of lawyers’ malpractice insurance, ALPS , offers a discount on subscriptions to Clio Manage , Clio Grow , or Clio Complete for law firms that purchase their coverage. Be sure to look through each resource to see which programs may apply to your law firm. 2. Choose carefully when applying for legal malpractice insurance
When applying for malpractice insurance, do not submit applications indiscriminately. To obtain a quote, many insurers request detailed applications from lawyers. These applications may become a warranty or representation of the insurance policy contract.
Hastily submit an incomplete application, and you could end up with higher attorney malpractice insurance rates. Certain activities may also be excluded from future coverage.
In short, it is wise to investigate insurers thoroughly and submit applications or requests for quotes only to your top contenders.
Here are a few questions insurers may ask:
In turn, here are some of the questions you should be asking potential insurers:
Tip: All of these questions and more are covered in the NYSBA’s comprehensive Checklist for Purchasers of Professional Liability Insurance . This checklist is worth a read if you’re in the market for legal malpractice insurance.
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The specifics of coverage are especially important to consider when purchasing legal malpractice insurance.
While your exact coverage will vary depending on your policy, legal malpractice insurance can help protect against claims such as:
Law firms can have trouble with four areas that standard professional liability insurance may not automatically cover:
Do not rush to take a case before having a lawyers’ professional liability insurance policy in place. The start date of legal malpractice insurance needs to be clear.
Many attorneys make the mistake of undertaking legal work at their new law firm before the policy start date. This opens your law firm to risk if that case leads to a malpractice claim—and if a claim pops up, your carrier will rightly point out that it falls outside the coverage period for your policy.
If you are opening your own law firm, wait to enter an attorney-client relationship with your potential business until after your insurance policy is signed and active.
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Legal malpractice insurance costs and premiums can vary greatly—and no two firms are guaranteed to pay the same amount for their coverage, no matter how similar they are.
Many factors contribute to the price of legal malpractice insurance. However, depending on your practice area, insurers look at two primary things when calculating the cost of legal malpractice insurance premiums: 1) Frequency (the number of claims the firm is expected to receive) and 2) Severity (the anticipated size or loss the insurer expects for the firm based on practice area).
It’s important to educate yourself on additional characteristics that are taken into consideration when calculating insurance premiums (for example, factors like how the amount of deductible will impact on the cost of legal malpractice insurance premiums). Understanding these characteristics will give you an idea of how much legal malpractice insurance will cost, and empower you with context and additional knowledge to bring into conversation with an insurance broker.
Factors affecting legal malpractice insurance premiums may include:
Your law firm’s geographic location can impact your attorney malpractice insurance rates, as each state is assigned a minimum premium requirement per attorney by insurers. More specifically, within each state, there are rates for every practice area. This is why the cost of legal malpractice insurance rates often changes on an annual basis: the current rate depends on the number of claims made in a given state, based on practice area.
Even the county your firm is located in contributes to your premium. This protects the insurance company but also helps your firm get an accurate premium estimate. For example, if your state is experiencing many claims, insurers will investigate the counties producing those claims rather than increase rates for the entire state. They can then raise the rates for the particular counties rather than the whole state.
As you add new lawyers to your firm, be prepared for an increase in your insurance premium—the larger the firm size, the more there is to insure, resulting in a higher premium.
However, some carriers offer discounts once a firm has hit a certain threshold of lawyers. Be sure to ask for information on these discounts when meeting with an insurance provider.
When it comes to solo attorney malpractice insurance cost, factors like staff size (such as any support or administrative staff members) can still impact your premiums. Some companies may also offer discounted rates for solos in their first three years of coverage.
It’s also worth noting that the American Bar Association suggests that solos look for insurance companies that specifically indicate that they write policies for as few as one lawyer.
Claims are a major factor when it comes to determining the cost of legal malpractice insurance. It’s important to note that the severity of the claims will matter more to the insurer than the number of claims. For example, you may have many claims made against your firm, but if none of them are paid out, you can expect your premiums to remain steady.
On the other hand, if a large claim is paid out, this will affect your insurance rates. In the instance that both the frequency and severity of claims are high at your firm, an insurer may even refuse to provide coverage.
If your firm has part-time attorneys, you can expect pricing discounts based on the annual hours worked. It’s common to categorize lawyers working less than 1,000 hours as part-time, and they may qualify for a reduced rate. Some insurers may also quote a further reduced premium for those working under 500 hours.
When filling out insurance applications and speaking with a broker, make sure to share this information. Doing so can save your firm money.
You may also want to ask your insurance broker about the endorsements that can extend the period for which you can be covered for claims, which could add additional costs. This could include prior acts coverage costs (for claims made for events that occur before your policy’s inception date) or legal malpractice tail coverage costs (for claims beyond your policy’s expiration date).
The cost of legal malpractice insurance can also be impacted by the amount of time you’ve been practicing. With a step rate structure , for example, insurance providers may offer lower or discounted premiums to attorneys in their first year (put simply, this is because new attorneys, in certain instances, may have done less legal work, and thus are likely at lower risk).
Each year, the premiums will increase as lawyers take the next “step” and their exposure to risk increases, up to a set amount of steps (typically six years).
When the inevitable occurs, and you receive a complaint from a client, what is the first thing you should do ?
“Notify your malpractice carrier immediately,” says Megan Zavieh , a lawyer whose firm represents lawyers in discipline disputes. “It doesn’t matter whether you believe the claim is viable or not; if a client brings a claim, notify your carrier. Insurance companies can deny coverage for a claim that you failed to report in a timely fashion.”
Once notified, your carrier will guide you on whether you need to seek counsel. They’ll also suggest steps to mitigate damages to your client and provide advice on analyzing what went wrong.
Remember, 80% of lawyers face a malpractice claim during their careers. Selecting and carrying a legal malpractice insurance policy is a business necessity for a law firm. Do your research when selecting an insurance policy, and you’ll find the benefits will far outweigh the costs.
We published this blog post in February 2017. Last updated: December 19, 2023 .
