Malpractice Insurance protects lawyers and their firms against claims and lawsuits alleging damages caused by the lawyer or firm for failing to provide adequate legal services. It allows a lawyer or law firm to have a financial cushion in case a lawsuit occurs. This goes beyond Commercial General Liability Insurance by addressing disputes involving damages as a result of a mistake made by lawyers or their firms. Examples of this type of damage would be:
- Incorrect submission or failure to follow submission guidelines
- Constructing contracts incorrectly
- Any other action that may be financially detrimental to customers.
Malpractice insurance also covers
- Before and after the trial
- Disciplinary Procedures/Bar Matters
- lost profit
- Expenses Associated with a Subpoena
- Privacy/Cyber Protection
- Outside Director Coverage
How much coverage do I need?
The amount of coverage depends on the claim and how much the attorney or firm can afford to lose. Your income and business assets, along with any personal assets you want to include, determine these. Another consideration is the number of billable hours that will be lost while fighting your own lawsuit. If you cannot afford to spend enough time on this type of lawsuit, higher amounts of coverage will be needed. Some coverage options include:
Previous acts –
- This is the date after which losses may have occurred and be covered by the policy.
- This date should be the initial date the company was formed.
Limit of Liability –
- This is the maximum amount the insurance company will pay for the coverage.
- The law firm or attorney will have to decide on the appropriate limit and then judge you on cost.
- Higher limits have a higher cost.
Deductible –
- The amount that can be paid out of pocket if a loss occurs.
Extended Reporting Period (ERP) Option –
- Covers claims that resulted from errors that occurred on or after the retroactive date and before the policy termination date and are reported during this period.
- You can choose between a five-year term or an unlimited term.
Claim costs –
- These are things like reasonable fees, costs, and expenses charged by the attorney through an advance or approved by the insured for a claim filed against him or her that are included within the limit of liability.
Global coverage –
- This type of coverage applies wherever the lawsuit is filed.
Reimbursement for Loss of Income –
- It is coverage for lost wages from attending hearings or trials that are associated with the lawsuit.
How much does malpractice insurance cost?
The cost of malpractice insurance is affected by how long the attorney has been in business, the amount of coverage required, the amount of the deductible, and the area of law they practice. Newer attorneys are less expensive than experienced attorneys due to the lower amount of risk. New attorneys are less likely to take on complex cases, which means there is less room for error when representing a client. In more complex cases, the greater the risk that a mistake could be made. The cost of new attorneys can be as low as $700 per year, while experienced attorneys may have to pay $5,000 to $15,000 per year.
What if I am a pro bono attorney?
If you are pro bono, there are four ways you can access malpractice insurance.
40 Access to Justice Program (ATJ) –
- You may have insurance that extends to a pro bono attorney or offer protection through a partnership with the State Bar Association Pro Bono Initiative Litigation Assistance Partnership Program (MI-LAPP for Michigan).
- These programs are offered through a law school that has a clinical program.
- The MI-LAPP is a secondary coverage, but if there is none, it becomes the main one.
Through an ATJ Reverse Referral –
- If a client has income and assets eligible under the eligibility rules and the case fits the program’s care priorities, it can be added to the file and malpractice coverage provided to the attorney.
The State Bar Association Pro Bono Initiative Litigation Assistance Partnership Program –
- You can offer malpractice insurance if the client can fit into the ATJ program or through the rollback referral.
- Client’s income is within 200% of the Federal Poverty Guidelines.
- The client’s liquid assets do not exceed $5,000.
- The point is that the private attorney would not handle an exemplary civil matter because there is no likelihood of being charged a fee.
Through CIMA’s Civil Liability Protection Program for Legal Services Professionals and Public Defenders –
- This is a made claims policy and coverage is conditioned upon the attorney promptly notifying the State Bar Association of any potential claim.
- Provides up to $250,000 of coverage for each claim and $500,000 total for professional liability.
- It also covers up to $100,000 of coverage for each claim and $300,000 total for personal injury coverage.
There is also a limited practice policy that allows attorneys to bring pro bono cases to low-income individuals or to a family member or friend. It is also for those who have a practice that is slowing down. Average hours in a work week are 5-10 or can be purchased for $300 a year.