Let’s face it: no one enjoys reading insurance policies. The fact is, however, that skipping this important step in protecting your legal practice and personal assets can have disastrous consequences. Be sure you understand the terms of any professional liability policy before you purchase it. If you’ve already purchased errors and omissions insurance and aren’t completely clear on its terms, take the time now to look over your policy, and consider whether it’s really giving you the protection you need.
What types of claims will (and will not) be covered?
In addition to lawsuit and settlement awards and defense costs, many legal professional liability policies provide coverage for professional complaints. This is an important feature because it is relatively simple for an unhappy client to file a complaint against you with your bar association or disciplinary board, and it doesn’t cost them a dime. On the other hand, a professional complaint can suck time and money out of your practice as you prepare documents, respond to subpoenas, and take other necessary steps to protect your practice. As a result, a policy that provides trained professional liability attorneys to help you defend against such claims is likely to be significantly more valuable to your practice than one that does not.
Be sure to read through the exclusions section of your policy carefully so you’re clear about the circumstances under which you will definitely not be covered. These typically include situations such as intentionally erroneous or fraudulent acts and errors that give rise to complaints from coinsureds or businesses in which an insured has controlling interest.
Will you be covered for a claim that arises from acts that occurred before your coverage period began? What about claims that are brought after your policy term ends? If possible, be sure to secure E&O coverage for all dates since you began practicing law. If you’ve been practicing for some time without coverage, this may not be possible. Once you have coverage, however, make sure you maintain it across policies. This means you may need retroactive coverage to cover acts prior to your new policy period and/or tail coverage for claims that arise after your policy ends.
Maximum Benefit Amount
Is your coverage limit appropriate to the area(s) of law you’re practicing? As you probably understand, different practice areas carry different risks. If you’re handling small-stakes cases for individual clients, then your professional liability needs will be very different from someone who works in securities or commercial transactions. Choose coverage limits that protect your business and personal assets from claims that can arise in your particular practice area(s).
It’s also important to understand whether defense costs are included in your coverage limit or treated independently. Typically, the costs involved in defending against a claim are included in your maximum benefit amount, and this should affect how much coverage you choose to purchase. If the costs of defending a claim are included in your coverage limit, then make sure you take out enough insurance to both defend a claim through the legal process and pay any judgment or settlement for which you may become liable.
Claims Against Others in Your Firm
Will everyone working for your firm be covered by the policy? It is common for legal professional liability insurance to cover office staff such as paralegals and legal assistants, but it’s important to understand how the details of your policy apply. This question can also arise if you hire contract attorneys or “of counsel.” Check the terms of the specific policy you’re considering to determine how claims against such individuals will be treated.
How does your deductible work?
It’s important that you are able to cover any out-of-pocket costs that arise, so make sure that your deductible is an amount that your practice can afford. While it may be tempting to save a little money each month by selecting a higher-deductible policy, don’t bet too heavily on not being sued in any given year. Statistics show that attorneys face an average of three malpractice claims throughout their careers, so it’s safest to think of such claims as normal costs of doing business and minimize their impact accordingly. Keep in mind however, that the likelihood of being sued and the cost of lawsuits vary widely across different areas of practice.
In addition to ensuring that your deductible is an amount you can pay, if necessary, it’s equally important to understand exactly how your deductible is applied. For example, what happens if you face two or more claims within a single coverage year? Are you liable for the deductible amount for each claim? Being clear on the precise terms of your coverage will empower you to make the best choices for your business as you balance the risk and cost involved in each E&O policy you consider.
If you’re ready to shop for E&O insurance for your legal practice, contact ProDefender. Our knowledgeable account service team can help you find a professional liability plan that fits your practice and your budget. Click the link below to request a free, no-obligation quote!