What You Need to Know About Legal Malpractice Insurance
For any individual or attorney that sets out to start a solo practice business, things can be quite rocky in the beginning. That is also due to the steep learning curve most of them are faced with. Even if you may be a highly experienced and train lawyer, you may still lack the resources and knowledge required to start running a successful business right away.
One of the most important things that most people who want to start a solo practice forget about is malpractice insurance. As surprising as it may sound, a lot of solo practices actually operate with zero malpractice insurance. Given the fact that 5 to 6 percent of all lawyers will face a malpractice claim this year (and the cost of that claim generally far outweigh the cost of getting malpractice insurance), it’s wise to actually get insured as soon as possible.
If you’d like to start your own practice and you want to make sure you won’t be caught off guard, then it’s highly recommended that you get malpractice insurance as soon as possible. With that said, below we’ll tell you more about the main reasons you need to get malpractice insurance.
1. Not every state requires you have it
One of the first things you need to bear in mind is that unlike the medical field, you don’t actually need to get malpractice insurance. Currently, only Oregon requires lawyers to get legal malpractice insurance. Even though getting legal malpractice insurance is not something that the law can compel lawyers to get, there are still a lot of lawyers in the United States that voluntarily choose to get it. In fact, they get this type of insurance for their own protection.
2. Premiums increase
If you have vehicle insurance and drive your car safely over the years and don’t change your policy, then you’re going to pay less and less for the premium. However, when it comes to legal malpractice insurance, it seems that this may not be the case. In fact, the longer you have the insurance for, the more you’re going to pay for the monthly premium.
3. Outside versus inside can make a great difference
One situation that a lot of lawyers won’t ever want to find themselves in is being sued for legal malpractice. If you’re currently facing one such situation or think that you may deal with one in the future, then you’re going to have to pay legal fees to defend yourself and an attorney as well. The fees shall be paid even if you don’t have to go to trial. One thing to bear in mind when looking for legal malpractice insurance is checking if those particular fees are covered. If the policy is termed inside the limit, then this means that you overall coverage will cover the legal costs. So if money has to be paid for potential damages, there’s going to be less of it available.
However, if you opt for an outside the limit policy, then on top of the policy itself, this is going to pay for legal defense fees as well. Overall, it’s important to mention that it’s more cost effective to find a policy that’s outside the limit.
4. Disclosure Requirements have become more and more common
Legal malpractice insurance is not currently mandatory, even though there’s been a lot of pressure coming from various consumer advocate groups in this regard. On the other hand, there are groups such as HALT that have successfully lobbied for disclosure lawns in about twenty six states so far. Some of these states include WA, CO, and CA, and the truth is that they actually require their lawyers to inform their clients whether they have legal malpractice insurance or not.
Depending on the state, in some of them clients may even need to sign a written statement where they acknowledge the fact the lawyer of choice is not covered by any type of legal malpractice insurance and that they accept that. Such laws have become more and more common and it probably won’t be long until more states may pass legislation that requires lawyers to get legal malpractice insurance. Once this happens, lawyers will need to start looking for legal malpractice insurance.
5. Cover your past with malpractice insurance
One thing to bear in mind about legal malpractice insurance is that it actually covers prior acts. So if at the time you had legal malpractice insurance in place, then you’re going to be covered from suits that may arise from your practice during that time. As you can see, these are very useful clauses that make it a lot easier for lawyers to make up their mind on purchasing legal malpractice insurance. Keep in mind that if something happens when you are not insured, then you’re not going to be covered by the policy for it.
6. Read and then sign
As an attorney, you probably know the importance of reading a paper before signing it and this is also the case with legal malpractice insurance. In terms of coverage, you’ll find that very policy is actually different and the same applies to the monthly premiums. So going with a policy that is very cheap may eventually mean that you have a much higher chance of ending up in court.
All in all, it’s important to be aware of the fact that starting a new business can be quite difficult. This is especially due to the financial and physical and also emotional commitment required to do so. As a new practitioner, you may be tempted to turn a blind eye to legal malpractice insurance, since it’s not actually required in most states. At the same time, by doing so you’re actually opening yourself to a lot of risks.
Some of these risks may even put an end to your career. To avoid that, you should start looking for legal malpractice insurance as soon as possible. Not only is it affordable, but it can help you deal with potential lawsuits that people may file against you in the long run.