The cost to defend a legal
malpractice claim is on the rise.
Are Your Assets
The practice of law has evolved dramatically over the last 30 years. Technological advances, coupled with the growth of lateral hires and multifaceted areas of practice have contributed to an increase in both claim complexity and severity.
According to a recent study by Ames & Gough, an industry-focused specialty insurance brokerage, nine insurers surveyed unanimously experienced an increase in the cost to defend legal malpractice claims citing claim complexity as a clear driver of this trend. Eight insurers indicated the average costs to defend a typical malpractice claim exceed $50,000; three saw costs between $100,000 and $500,000, and two indicated average costs are more than $500,000. The nine insurance companies polled, on a combined basis, provide insurance to approximately 80 percent of the Am Law 100 firms.
So policy limits that would suffice three decades ago may not be adequate to cover the defense costs required to defend today’s legal malpractice claims. Inadequate limits could leave a firm at risk of exposure above its policy limits. If a firm fails to purchase the appropriate amount of professional liability coverage, it could put both personal assets and the firm’s assets at risk.
“The potentially substantial cost of malpractice claims underscores the need for law firms to give careful consideration to the professional liability insurance limits they purchase,” Eileen Garczynski, senior vice president and partner, Ames & Gough noted in the study. “At the end of the day, when a large claim occurs your firm needs to make sure it has adequate financial protection.”