Cheap Lawyers Liability Insurance
When Saving Money Could Cost You More
Attorneys want affordable lawyers professional liability insurance. With rising operating costs and increasing competition, reducing insurance expenses improves profitability. But when it comes to legal malpractice coverage, the cheapest option is not always the best option.
An insurer may promote a miscellaneous professional liability policy as providing coverage comparable to a traditional lawyers professional liability policy. While the premiums appear attractive, carefully review the policy language and endorsements before assuming it provides the same protection as a legal liability malpractice policy.
The reality is simple: you need coverage that responds to claims in your practice areas.
Not All Professional Liability Policies Are Created Equal
Assuming if a policy lists “Attorney” as an insured profession, it automatically functions like a lawyers professional liability policy.
That assumption can be dangerous.
Imagine a miscellaneous professional liability policy providing professional services coverage while simultaneously excluding entire legal work categories through endorsements. Discovering customary practice areas coverage exclusions after a claim arises is a little late.
Policy limits matter little when there is no coverage for the work you perform.
The Hidden Risk of Practice Area Exclusions
Imagine a miscellaneous professional liability policy “attorney” endorsement specifically excluding claims arising out of legal services involving common practice areas.
Among the excluded areas are:
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- Divorce and family law matters.
- Real estate transactions.
- Title matters involving real property or land.
- Zoning law matters.
- Patent, trademark, copyright, and trade secret matters.
- Securities-related transactions.
- Estate and trust fiduciary services, including acting as trustee, executor, or administrator.
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These practice areas represent significant portions of business for certain law firms.
Why This Matters in the Real World
Consider common scenarios:
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- Family Law Representation – The client accuses the attorney in a divorce matter of failing to properly identify marital assets or missing a filing deadline. Under a policy that excludes services regarding divorces, the attorney faces the claim without insurance protection.
- Real Estate Transactions – The client accuses the lawyer representing buyers or sellers in a commercial real estate closing error. With real estate services excluded, the claim falls outside of coverage.
- Estate Planning and Fiduciary Work – Coverage exclusions exist for lawyers acting in a fiduciary role as trustees, executors, or administrators.
- Intellectual Property Matters – Coverage exclusions exist for doing trademark registrations, copyright disputes, patents, or trade secrets.
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Price Should Never Be the Only Buying Factor
Price shop for lower premiums but beware of significant differences between:
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- A policy that is inexpensive because it is efficiently underwritten, and
- A policy that is inexpensive because of coverage exclusions.
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Attorneys should evaluate the following before purchasing coverage:
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- Legal services practice area coverage.
- Legal services practice area exclusions.
- Does the policy match the firm’s current practice areas?
- Will future practice expansion create uncovered exposures?
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The declarations page alone rarely tells the entire story. The policy and endorsements define the true scope of coverage.
The Cost of an Uninsured Claim
The financial consequences of a professional liability claim can be severe. Even when an attorney prevails defense costs are substantial. According to one insurer the defense costs for a claim going trail average over $75,000. A lawyer purchasing coverage primarily because it is the lowest-priced option may save money upfront but face significant uninsured exposure when a claim arises from an excluded practice area.
The question should never be, “What is the cheapest policy available?”
The better question is:
“Will this policy respond to the type of legal work I actually perform?”
Final Thoughts
Low premiums are appealing, especially for solo practitioners and small firms. However, attorneys should approach any insurer marketing a miscellaneous professional liability policy as equivalent to a traditional lawyers professional liability policy with caution. Carefully review the policy, endorsements, and exclusions. Policies excluding common legal practice areas may provide little protection.
The best lawyers professional liability insurance policy is not necessarily the cheapest one. The best lawyers professional liability insurance policy provides meaningful protection for your firm’s practice areas.
Request a Legal Malpractice Quote
Contact Me Today
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
