Legal Malpractice Insurance Does Not Cover All Claims

The right insurance for your law practice can mean the difference between staying in business and financial ruin. Professional liability insurance for lawyers, also known as legal malpractice insurance, protects lawyers against lawsuits when mistakes are made involving a client's case. Maintaining this type of insurance also lets your clients know that your practice is sophisticated enough to ensure that there is a way for clients to be covered if mistakes happen.

No Requirement for Legal Malpractice Insurance

Professional liability insurance is optional insurance coverage for lawyers. State bar associations require lawyers to inform the bar if they carry this type of insurance, but this is not the same as requiring coverage. There are good reasons why certain lawyers may not need malpractice insurance. For example, a lawyer may decide to self-insure. However, malpractice insurance is considered the best way for lawyers to protect their business and personal assets from client lawsuits claiming mistakes were made in a case. Some clients, especially business clients, will request proof of insurance before they hire you.

Only Certain Claims Are Covered

Legal malpractice insurance covers only claims made during the term of the policy. This type of insurance is unlike other types of insurance that cover claims based on when an event occurred. With a legal malpractice policy claim, the client must file the claim while the policy is in effect, even if the malpractice occurred while the lawyer was not covered.

Limits and Exclusions

Professional liability insurance policies are complicated. It is important to read the policy carefully to understand the scope of coverage. Most policies limit the amount paid out for a single claim and also set a limit on the total amount that can be paid out for all claims during the policy term. Some policies also exclude certain types of legal work. For example, a policy may only cover a tax lawyer for doing tax work and not for other types of legal work such as family law.

Criminal Acts Not Covered

Malpractice insurance only covers mistakes. It does not cover a lawyer's intentional, illegal acts. This type of insurance is only designed to protect lawyers against failures to exercise ordinary care, such as accidentally missing a filing deadline. If a lawyer diverts money from a client's account, for example, the malpractice insurance policy would not cover claims against those actions.

An Insurance Lawyer Can Help

The law surrounding professional liability insurance policies for lawyers, and claims under these policies, is complicated. Plus, the facts of each case are unique. This article provides a brief, general introduction to the topic. For more detailed, specific information, please contact an insurance lawyer.

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