4 frequently asked questions about legal malpractice insurance

A lawyer or a law firm can face a legal malpractice case because of missing a deadline or due to professional negligence. A claim can also be the outcome of a dissatisfied client or conflict of interest of the lawyer handling the case. In all of these cases, a law firm or a lawyer will have to shell out a lot of money to deal with disputes related to legal malpractice. The cost of hiring an independent attorney to deal with the case and other legal fees can lead to substantial expenses.

Legal malpractice insurance will protect a lawyer or law firm against a majority of the malpractice claims. However, there are certain exceptions which are not covered by malpractice insurance. These include fraudulent acts, services given to a business controlled or owned by the insured lawyer, or services offered as a fiduciary as stated by the ERISA Act 1974. Despite these exceptions, malpractice insurance protects a lawyer or law firm against all malpractice claims that result from a disgruntled client. If you are looking for legal malpractice insurance, here are a few things you ought to know.

Which are some of the well-known legal malpractice insurance companies?

• Admiral Insurance Company
  This company provides insurance to lawyers in at least 49 states. They offer legal malpractice insurance to lawyers who have a solo practice or firms that have one to 50 attorneys. The minimum deductible offered is around $5000. However, the deductible can be lower on a case-by-case basis.
• The Bar Plan Mutual Insurance Company
  The services of this insurance company are available only in fives states — Kansas, Indiana, New Mexico, Tennessee, and Missouri. There are no restrictions on the size of the firm, and they provide legal malpractice insurance cover to firms irrespective of the number of lawyers they employ. The minimum deductible is around $1,000, and the maximum deductible is $100,000.
• State National Insurance
  State National Insurance provides legal malpractice insurance to lawyers across all the states, the Virgin Islands, and Puerto Rico. They offer insurance services to firms that have one to 100 associates. The aggregate deductible is around $1,000.
• Travelers
  This insurance company offers its services in all states except Oregon and California. Firms that have one to 100 associates can avail of legal malpractice insurance services. The minimum deductible amount is $1,000, and the maximum is $500,000.

What should you know about your legal malpractice insurance company?

• The financial security of the firm
  The financial reputation of the insurance provider will indicate whether the company is capable of meeting its contract obligations and fulfilling all the requirements of their insurance policies. One can ascertain the financial strength of an insurance provider through rating agencies such as A.M. Best.
• Policy premiums offered
  The cost of the policy premium depends on the limits of the policy, retentions or deductibles, location, claims history of the law firm or the lawyer, and the area of practice. Ensure that the premiums offered are as per market rates.
• License
  Most states require insurance companies to have a license to offer insurance services including legal malpractice insurance. You can check whether your insurance provider has a license or not from the National Association of Insurance Commissioner.
• Customer service
  Good customer service ensures that your insurance provider is prompt and professional if you face any issues with your insurance. Do some research and check reviews about the efficiency of the customer service offered by the insurance company before buying a policy.

What information should you provide to the legal malpractice insurance company?

• The most basic information includes the name of the lawyer or the firm, the address of the office, and the number of associates and other employees in the firm.
• The insurance company will require an applicant to give information about the area of practice. Most applications for legal malpractice insurance have a grid indicating their areas of practice. This grid lists major legal areas classified into different groups. A firm may deal with diverse practice areas. The application requires that the overall practice is broken down into percentages of particular practice areas. One can base this percentage on the gross revenue of the specific area or the number of hours worked in that area.
• Firms or lawyers also need to provide information regarding the internal systems or procedures put in place to avoid a malpractice claim. Also, the insurance provider may ask for a five-year claims history.

What can you do to lower the risk of legal malpractice claims?

• Ensure to screen clients before signing them up. Clients who are overly litigious or had multiple lawyers before, or have unrealistic expectations can cause problems later on.
• Be wary of possible conflicts of interest. In case there is a waivable conflict, ensure that there is timely and informed consent, which is in written and signed by the client. The document should give all the details of the conflict.
• Most malpractice claims are the result of missing deadlines or the statute of limitations. An effective way to avoid this is by using docketing systems, calendars, and other safeguard systems.
• Maintain a paper trail of all the communication and advice given to the client. Document all the instructions and details of meetings with clients. Send follow-up emails after meetings, particularly the ones where the client has received bad news as this will help in effectively dealing with malpractice claims if the client has a different recollection of a particular meeting or event.