Small firm attorneys may choose to go without malpractice insurance in the mistaken belief that their close relationship with their clients makes them immune to claims. Other attorneys believe that the chances of facing a claim are low. The logic flaw is that small firm attorneys are just as likely to have a malpractice claim as their more high-profile peers. Many small firm lawyers believe that they will have to pay just as much as their large firm peers, so it is too expensive.
Legal malpractice insurance costs vary widely. No two attorneys even with a “clean” record are going to pay the same coverage. The key factors affecting premium cost are:
- Number of attorneys in the firm
- Claims history
- Practice areas
- Number of years maintaining continuous claims-made coverage
- Type of clients
The costs for different areas of practice can differ 5 to 10 times from one area of practice to another. Criminal law and insurance defense generally are low costs practice areas; with Securities Placement, Class Action Work and Intellectual Property being some of the highest cost practice areas.
Premiums start for as little as $200 to $500 for an attorney without coverage in low risk practice areas but expect premiums to rise over the first 5 to 7 years. With adequate limits the average costs for a fully rated attorney should be $1,200 to $2,500 per year. Attorneys in higher risk practice areas should expect to pay around $3,000 to $10,000 per year. These premiums vary by state and location in the state based on the insurer’s past claims experience. And remember that law firms are insured as an entity and the cost is on a per-attorney basis.
For most attorneys this cost is small versus the risk to one’s assets, just one martini per week for that 1st year of coverage. For attorneys, Malpractice Insurance is Sleep Insurance.
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Lee Norcross, MBA, CPCU
Managing Director, CEO
(616) 940-1101 Ext. 7080