What is lawyer’s insurance?
Lawyers insurance compensates attorneys against the losses posed by various risks of the legal industry. Malpractice lawsuits are the most common lawsuits in the industry.
Once there is a lawsuit, you have to pay legal fees whether you are at fault or not. This is because you have to pay attorney fees and fight the case to prove yourself innocent. The Connecticut General Assembly states that your client can file a malpractice claim against you until three years of the alleged misconduct. While attorney malpractice insurance is one of the most important policies, there are other policies you will need to obtain to indemnify yourself against all the risks.
Why do you need lawyer’s insurance?
Malpractice insurance for lawyers covers losses and makes the clients feel secure. A newsletter from Above The Law stated that having a lawyer’s liability insurance is a legal obligation in Oregon and Idaho. In other states, firms need to give notice that they do not have insurance. Not having insurance can also affect your goodwill.
For example, if a client files a case against you for being negligent, the insurance for lawyers will keep you covered.
The benefits of having lawyer’s insurance are:
- Protects you against claims of ignorance or negligence.
- Protects your staff against claims.
- It gives security which in turn increases efficiency.
- It increases your goodwill and builds trust among the client base.
What policies fall under attorney insurance?
Business Owners Policy (BOP):
Business owners policy (BOP) provides coverage for small law firms. It combines commercial auto policy, general liability insurance and business interruption insurance. Combining the policies protects your law firm and saves you money on insurance premiums. As per the Insurance Information Institute, firms with annual income less than $5 million and less than 100 employees are eligible for a BOP.
BOP will protect you against bodily injury, property damage, loss of business income, and loss of commercial property.
For example, if your employee fumbles over an antique vase at a client’s home, BOP would cover the losses.
Commercial General Liability Insurance:
General liability insurance protects your law firm for bodily injury or property damage losses. You are liable to pay for third-party damages if the loss happens during your practice of law or in your premises.
You require this policy separately in yours lawyers insurance package if you are a large law firm.On the other hand, you can bundle up CGl in BOP for smaller firms.
For instance, if a client trips onto your broken stairs and falls, this policy will keep you covered. However, it does not cover losses that occurred during operations.
Commercial Property Insurance
Commercial property insurance protects the property owned by a business.Commercial property insurance covers assets including electronics, hardware, or any other belongings. If you own the office building, commercial property insurance will protect you from named perils.
Worker’s Compensation Insurance:
This policy is essential in lawyer’s insurance because fighting legal cases can be stressful and dangerous. As per a survey by the Bureau of Labor Statistics in November 2019, there were 66,100 workplace injuries and 4,400 workplace illnesses in professional and technical services. This is among the top ten highest number of injuries.
Therefore, worker’s compensation insurance is important. For example, if a defendant attacks one of your lawyers in court, workers’ compensation will cover your losses.
Commercial Auto Insurance:
Commercial auto insurance covers vehicles owned by a business. Also, it covers personal cars that you use for the company. Forbes states that you can get a tax deduction when you use your vehicle for business operations. Hence, purchasing insurance for business vehicales ia a wise option.
Commercial auto might provide additional coverage for when the personal auto insurance of your employee is not sufficient to cover their losses.
For example, if your employee hits another car while driving to the court, you may be legally liable for the losses. Commercial auto insurance can cover you in such cases.
Cyber Liability Insurance:
Cyber liability insurance covers the losses caused by cybercrimes. These losses can be from data loss, theft, or misuse of data online. Cyber liability insurance covers both the direct and indirect costs of cybercrime. This cost can be related to lawsuits or repaying the loss due to data breach.
As an attorney, you have high risks of cybercrime. A report from the National Cyber Security Centre states that 60% of law firms reported an information breach in the last year which is an increase of almost 20% from the previous year. You have sensitive data that you might use to win cases. Therefore, having cyber liability insurance in your lawyers insurance package is necessary.
Commercial Umbrella Insurance:
Commercial umbrella insurance provides additional coverage to the general and auto liability policies. This policy does not cover the lawyer’s professional liability. Legal professional liability insurance or malpractice insurance is required to cover professional liability.
For example, if an accident injures two of your employees, this might pose a substantial financial loss for you. The losses might exceed the limits of the policy in play, which can cause significant financial burden to your firm. In such significant cases, umbrella insurance comes to your aid.
Malpractice insurance covers professionals when a client files a lawsuit against them. This policy is also called lawyers professional liability insurance.
It covers you if a client sues you for professional errors, misjudgements, or malpractice. The American Bar Association states that a lawsuit for malpractice will be filed against four out of five lawyers once in their career.
Malpractice insurance for lawyers gives you the risk-free mindset to focus on work.
For example, if a client loses a case and files another case of negligence against you, malpractice liability will keep you covered.
Some standard exclusions from the attorney malpractice insurance are:
- Fraud: Intentional fraud or criminal activities are excluded because these are uninsurable by law.
- Legal services to related firms: Legal services provided to firms related to or owned by your attorney are excluded.
- Internal employee conflicts: Lawsuits for legal fights between employees of the same law firm are excluded from the package as a general rule of thumb. Internal conflict management systems can help in solving such issues.
- Pre-expected claims: If a claim was expected before purchasing a policy, it is not covered in the lawyers insurance. If a claim is pre-expected, the insured must give notice in advance to get claim. In some cases, the insurer might deny coverage even after advance notice.
- Unnamed perils: Any perils except for the named perils are excluded from the insurance package. Named perils are decided before signing the agreement for the insurance. Named perils generally include loss due to theft, fire and vandalism.