Best Practices Attorney Malpractice Liability Limits
What are the proper attorney malpractice policy limits is a frequently asked question. An insurance agent/broker really cannot answer what are the best policy limits for your law firm. The broker simply does not know your law practice well enough. Even though there are general policy limit guidelines, there is no concrete answer. In determining liability limits consider the law firm’s practice areas and clientele. Finally it gets down to the potential cost of making a mistake.
Even the type of practice criminal versus plaintiff work is not enough to answer the question. One criminal law attorney may represent high profile clients. Another may only represent misdemeanor clients. What could it cost for allegations of malpractice or in adequate defense? A wealthy criminal client could have the resources to pursue you for years.
Estate work limit requirements vary widely depending on the estate size and type. Remember that the average case value is not a good measure. A better measurer is the largest or potentially largest case size.
Your Lawyers Professional Liability Insurance application asks risk assessment questions, making it an excellent source to help evaluate the limits needed. States may mandate minimum policy limits based on firm size or other criteria. Clients and referral services may require certain minimum limits.
Once you settled on a per claim limit, the next step is to determine the likelihood of multiple claims in any one policy year. The aggregate policy limit can be equally important. An example of the aggregate limit adequacy is the collections practice area. An administrative procedural error repeated multiple times adds up quickly.
Another consideration is that policy limits are difficult to increase during the policy year. Certain underwriters may consider midterm policy limit increases where a client is requiring higher limits. After a malpractice allegation against the firm, it is too late to increase limits.
Inadequate liability limits is a potentially expensive proposition. An underinsured attorney finds their insurer pays out only the policy limits on a claim that exceeds the value of the policy. Once the insurer pays out the policy limits their obligation to the law firm ends. Going forward the firm is on their own for defense and indemnity costs. Better to save money with a higher deductible.
With attorney malpractice claims-made coverage, just because the firm has moved to lower liability limit case types does not mean you should lower liability limits at that renewal. Your inforce policy is the policy form that settles claims for allegations past acts malpractice made during the current policy period.
Remember Attorney Malpractice Insurance is “Sleep Insurance.” Given the policy limits that you have chosen, how well will you “Sleep” at night.
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Lee Norcross, MBA, CPCU
California License # 0D87292
L Squared Insurance Agency, LLC ® DBA in California as L2 L Squared Insurance Agency, License # 0L93416
Managing Director, CEO
Lee@L2Ins.com
616-726-7080
