“My Friend does the same thing I do but is paying half what I pay for Attorney Malpractice Insurance.”
This often asked question only comes from the attorney that may be paying more than his friend. I say, ‘may be’, because occasionally they are both paying the same premium. Ever play liar’s poker? But there are cases where the premiums are dramatically different. Because of insurance privacy laws, we cannot share insurance information to anyone about someone else’s insurance premium, insurance application or policy. Nor will we without a signed release or a court order.
Both attorneys may be with the same insurer and we may write both accounts. But friends do not tell everything. Also, their law practices at least on insurance application may very different.
The factors that impact attorney malpractice insurance costs are:
1. Practice area differences impact legal malpractice premium rates, sometimes by 2 or 3 times the premium. This is especially true if one firm has high risk practice areas such as Medical Malpractice or Real Estate and the other attorney does not. Even if they ‘do’ the same thing, if the areas of practice percentages are different the premiums can be very different.
2. The prior acts dates may differ. If one attorney one has had coverage for one or 2 years and the other attorney has “full prior acts”, the attorney malpractice insurance costs can differ by over 50%.
3. The limits of liability for the malpractice policies may be different. One attorney’s malpractice policy has claims expenses outside the limits (CEOL) and the other does not.
4. The deductibles may be different, or one has 1st dollar defense and/or an aggregate deductible and the other does not
5. The hours worked for the 2 attorneys can differ.
6. One attorney has great internal controls the other attorney’s procedures are lacking.
7. One attorney sues clients to collect unpaid legal fees; the other attorney has never sued a client.
8. One attorney has had claims and the other attorney has never had a claim or disciplinary matter.
9. The attorneys are with different malpractice insurers. Premiums from one insurer to another can differ by over 50%.
10. And finally, two attorneys interpret the same application question differently.
Each factor can have a dramatic impact on premium. When you combine two or more of these factors attorney malpractice premiums can easily be 2 or more times different.
Lee Norcross, MBA, CPCU
Managing Director, CEO
(616) 940-1101 Ext. 7080