What Happens to Lawyers Professional Liability Coverage After Leaving a Law Firm?

What Happens to Lawyers Professional Liability Coverage After Leaving a Law Firm?

Understanding Lawyers Malpractice Coverage When Leaving a Firm

A common misconception among attorneys is that their fully paid professional liability (malpractice) insurance continues uninterrupted until expiration after they leave a law firm. However, this belief can lead to serious coverage gaps and unexpected exposure to liability.

Once an attorney departs from a law firm, no coverage exists for new work performed after the departure under the firm’s existing policy.

Lawyers professional liability insurance specifically covers work done on behalf of the named law firm, not the individual attorney independently. This distinction is critical for attorneys transitioning between firms or starting their own practice.

Why New Work Is Not Covered After Departure

Lawyers professional liability policies are claims-made policies that insure the firm and its associated attorneys for acts performed within the scope of that firm’s operations.

Once an attorney leaves:

• • • The firm’s policy no longer applies to their future legal work
    • Coverage only applies to acts performed while they were part of that firm
    • Any legal services rendered after departure requires new coverage

As a result, attorneys must take steps to ensure they are insured for ongoing and future services.

What Coverage Still Applies After You Leave?

While excluding new work, there is an important protection that remains intact.

Lawyer professional liability policies normally allow the former firm to maintain past acts coverage for work the departing attorney performed while employed at the firm when the firm continues its claims-made policy without interruption. Note there are exceptions with certain insurers to this statement.

In addition:

• • • Policies often define the “insured” broadly to include past and present attorneys, employees, and partners for work done for the firm
    • This means that the firm’s policy provides prior work coverage for claims arising from past acts

However, this protection depends on the firm maintaining continuous coverage.

Do You Need Tail Coverage (ERP)?

Another misunderstood area is Extended Reporting Period (ERP), often referred to as “tail” coverage.

For departing attorneys:

• • • There is generally no need to purchase an individual ERP tied to the firm’s policy
    • Certain insurers do not allow individual ERP purchases, only firm-level tail coverage

This means attorneys cannot rely on purchasing a tail policy after leaving to extend their protection under the firm’s insurance.

The Hidden Risk: Loss of Future Rights to Coverage

One of the biggest risks occurs if the former firm:

• • • Dissolves or breaks apart without covering past acts
    • Fails to maintain its lawyers professional liability policy

Once an attorney leaves, their right to purchase an ERP under the firm’s policy typically ends.

This creates a potential gap where:

• • • If the previous firm’s insurance terminates, past acts coverage may terminate
    • The attorney has limited options to secure retroactive protection

Alternative Options for Departing Attorneys

For ongoing protection, attorneys may explore alternatives such as:

1. 1. 1. Joining a New Firm Policy

Having your new firm added to their professional liability insurance and requesting coverage for past acts (career coverage).

1. 1. 2. Purchasing an Individual Policy

Attorneys starting their own practice must obtain their own malpractice insurance to cover all new legal services.

1. 1. 3. Run-Off Policies

A run-off policy may provide coverage for past acts at an individual level. However:

• • • • These policies are often expensive
      • They can be difficult to obtain

Key Takeaways for Attorneys

To avoid gaps in coverage when transitioning between firms:

• • • ✅ Understand once to leave your firm so does your coverage for new work
    • ✅ Confirm that your prior firm maintains continuous claims-made coverage
    • ✅ Secure new malpractice insurance immediately for future work
    • ✅ Evaluate the need for additional protection (like run-off policy)

Lawyer professional liability covers the law firm and associated attorneys at the firm, not the individual attorney. Failing to recognize this can leave attorneys exposed to significant financial and legal risk. When an attorney understands the coverage and plans ahead before making a transition, the attorney can insure insurance protection throughout their career moves.

Request a professional Liability 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