LEGAL MALPRACTICE INSURANCE COST: how much attorneys pay for their coverage, and the factors that determine the premium.
Published by Lawyers Insurance Group, legal malpractice insurance brokers.
Apply on-line to obtain fast, free quotes from ‘A’-rated insurers.
I. Legal Malpractice Insurance Cost – Fast Facts
- Most sole practitioners will pay $500 – $1,000 for their first policy. A 2-atty. firm will pay slightly less than double that; a 3-atty. firm, slightly less than triple that, etc. Premiums are 25% – 50% higher in NYC, NJ, Miami-area, LA-area, and San Francisco-area; up to 35% lower in rural areas.
- The premium is based mainly on your firm’s atty. count, practice areas, policy limits, and county/state.
- Criminal defense lawyers pay the least, then immigration; family and business; bankruptcy and employment; PI, real estate, and trusts-estates, and patent, securities, and class action lawyers, who pay the most.
- The minimum policy limits are $100,000 per claim/$300,000 annual aggregate, followed by $250,000/$500,000, which costs about 35% more, and then $500,000/$1,000,000, $1,000,000/$1,000,000, etc. Each higher level costs 10% – 25% more. Most solos choose one of the first two levels.
- Attorneys who practice 26 or fewer hours per week, qualify for a part-time rate, which will reduce the premium by 35% – 50%.
II. Legal Malpractice Insurance Cost – Examples of How Much Firms Pay For Their First Policy
California
Firm Size Main Practice Area Policy Limits Deductible Annual Premium
1 Immigration $500K/$1M $2,500 $1,676
1 Plt. + Def Civil Lit. $1M/$1M $1,000 $2,063
1 Family, Crim. Def. $1M/$1M $1,000 $1,329
Georgia
Firm Size Main Practice Area Policy Limits Deductible Annual Premium
1 Real Estate, Family $500K/$1M $1,000 $800
Maryland
Firm Size Main Practice Area Policy Limits Deductible Annual Premium
1 Elder Law, Gov.t Cont. $500K/$1M $1,000 $812
1 Real Estate $250K/$500K $2,500 $1,175
Michigan
Firm Size Main Practice Area Policy Limits Deductible Annual Premium
1 Criminal Defense $500K/$1M $2,500 $530
2 Family, Immigration $500K/$1M $1,000 $1,192
New Jersey
Firm Size Main Practice Area Policy Limits Deductible Annual Premium
1 Civil Lit. (Defense), Business $500K/$1M $1,000 $1,257
New York City
Firm Size Main Practice Area Policy Limits Deductible Annual Premium
1 Business/Trademark $250K/$500K $2,500 $1,200
1 General Practice $250K/$500K $1,000 $858
1 Personal Injury $1M/$1M $1,000 $1,394
1 Immigration $250K/$500K $2,500 $895
1 Real Estate $1M/$1M $2,500 $1,629 (Nassau County)
2 Business, Civ. Lit. $1M/$1M $2,500 $2,439
New York – upstate
1 Real Estate, T-E $1M/$1M $1,000 $1,056
1 Business $250K/$750K $1,000 $664
Ohio
Firm Size Main Practice Area Policy Limits Deductible Annual Premium
1 Crim. Def., Family $100K/$300K $1,000 $327
South Carolina
Firm Size Main Practice Area Policy Limits Deductible Annual Premium
1 Family $500K/$500K $1,000 $736
Texas
Firm Size Main Practice Area Policy Limits Deductible Annual Premium
1 Criminal Defense $100K/$300K $2,500 $322
1 Business $1M/$1M $2,500 $1,379
1 PI $2M/$2M $2,500 $2,524
2 Immigration, PI $100K/$300K $1,000 $1,139
Virginia
Firm Size Main Practice Area Policy Limits Deductible Annual Premium
1 Business, Telecomm. $1m/$1M $2,500 $944
Washington, DC
Firm Size Main Practice Area Policy Limits Deductible Annual Premium
1 PI, Plt. Civ. Lit $500K/$1M $2,500 $1,124
III. Legal Malpractice Insurance Cost – Factors That Affect Your Premium
Here are the primary factors that legal malpractice insurers use to calculate a firm’s annual premium:
Firm size – the number of lawyers in a firm, and whether each one works full-time or part-time. Note: all of the placements shown above are for full-time attorneys, which most insurers define as working more than 26 hours/week. Part-time attorneys generally pay lower premiums.
The number of years each lawyer has been with a firm (not his/her total years in practice) – insurers use “step rating” to calculate premiums, whereby a lawyer’s pre-mium is lower in his first year with a firm (step 1), when he has fewer cases, and rises in each of the next four years steps (2 – 5), as his cases from the previous years develop, and he takes on additional cases, both of which increase his malpractice claims risk (a claim generally isn’t filed for 1 – 4 years after an atty. makes an error). (See Prior Acts coverage below.)
After five years with a firm (some insurers use six or seven years), a lawyer is consid-ered to be “mature”, as the malpractice claims risk of his new and developing cases is offset by the statute of limitations tolling on his older, closed cases. At that point, his premium no longer increases each year based on this factor.
Area(s) of Practice (AOP) – a lawyer’s premium will be debited (surcharged) if she specializes in a high-risk AOP, i.e., Medical Malpractice, Securities, or Intellectual Property law, or credited (reduced) if she specializes in a low risk AOP, i.e., Criminal Defense, Insurance Defense, or Immigration law.
Policy Limits – the minimum policy limit is $100,000/$300,000, which means the insurer will pay a maximum of $100,000 for defense and indemnity costs for any claim made against the firm during the policy period, and a maximum of $300,000 for all claims made against it during the policy period, which is 12 months.
The next level of limits is $250,000/$250,000, then $250,000/$500,000, $500,000/$500,000, $500,000/$1M, $1M/$1M, $1M/$2M, etc.
The higher a firm’s policy limit, the higher its premium. A policy with a $250,000/$250,000 limit costs about 35% more than a policy with a $100,000/$300,000 limit, and each higher limit above $250,000/$250,000 usually increases the premium by 10% – 15%.
Deductible – the amount the firm must pay for claim expenses and indemnity costs before the insurer will begin paying. The minimum deductible is $1,000 per claim; higher options are $2,500, $5,000, $10,000, $15,000, $25,000, $50,000, $100,000, etc.
The higher a firm’s deductible, the lower its premium, but insurers will offer only as a high a deductible as they believe it can afford to pay, based on its annual revenue, etc.
Nearly all firms whose malpractice insurance premium is below $10,000 have a de-ductible of $1,000, $2,500, or $5,000 per claim, because insurers won’t offer them anything greater. Within this range, each higher deductible will reduce the premium by 1% – 3%, i.e., raising it from $1,000 to $5,000 will reduce the premium by about 5%.
Prior Acts coverage – a/k/a Retroactive coverage, refers to coverage for a claim that arises out of malpractice that an attorney committed before the firm’s current policy’s inception date.
Prior acts coverage doesn’t apply when you buy your first malpractice policy, , i.e., the policy won’t cover any work that you did before the policy inception date. However, if you renew the policy a year later, it will cover work that you did back to the inception date of your first policy, i.e., one year ago. So, in your second year of coverage, you’ll have one year of prior acts coverage, in your third year, you’ll have two years of prior acts cov-erage, etc.
Insurers charge extra for each of the first four policy renewals, as explained above in the section on ‘step-rating’, which increases the premium in Years 2 – 5 of coverage, independent of any other factors that affect the premium, i.e., a change in the firm’s practice areas. These increases stop after year 5 of coverage, because the SOL tolls on work done 3 – 4 years ago, which offsets the risk that an atty. will occur a claim on a recent matter, i.e., after 5 years, an attorney’s prior acts exposure reaches an equilibrium point.
Territory – a firm’s premium will be debited (surcharged) if it’s located in NYC, LA, Miami, San Francisco, and certain other locales, or credited (reduced) if it’s located in a rural area.
Malpractice Claims – a firm will pay a higher premium if any of its lawyers has recently been sued for malpractice; how much higher depends on the number of claims, and the total dollars its insurer paid out to resolve them.
Risk Management practices – a firm’s premium will increase if its calendaring or con-flicts-checking system is inadequate, it doesn’t use engagement, disengagement, and non-engagement letters, it sues clients for unpaid fees, etc.
Keep in mind that your objective shouldn’t be to buy the cheapest policy, or the biggest policy, but the right policy, based on your practice, budget, risk tolerance, etc. That’s what each of the firms whose policy terms are listed below did. We presented them with proposals – different combinations of coverage, limits, deductible, and premium – from various insurers, and then reviewed the proposals with them to determine which one best met their needs.
Here’s an explanation of the column headings:
Firm size – the number of full-time lawyers in the firm, i.e., 1 = a solo practitioner.
Location – the city/state where the firm’s main office is located.
Policy Limits – explained above.
Deductible – explained above.
Prior Acts coverage – explained above
Annual Premium – the cost of one year of coverage
IV. Legal Malpractice Insurance Cost – Learn More or Request Quotes
- To learn more about legal malpractice insurance, visit these pages:
Legal Malpractice Insurance FAQs – Coverage, Limits, Cost, etc.
Legal Malpractice Insurance Policy
Legal Malpractice Insurers - If you have any questions, contact our principal broker, Curt Cooper at
(202) 802-6415 or ccooper “at” lawyersinsurer.com. - To get the best terms on your firm’s malpractice insurance, fill out our on-line application, or download, complete, and return our one-page premium estimate form:
Online:
Family Law Online Application
Immigration Law Online Application
Injury Law Online Application (PI, Med. Mal. , WC, SSDI )
IP Law Online Application
Real Estate Law Online Application
Trusts & Estates Law Online Application
All Other Practice Areas Online Application
Download:
Employment Law firms
Family Law firms
Injury Law firms (plaintiffs Med. Mal., Personal Injury, SSDI, Workers Comp.)
Intellectual Property Law firms
Tax Law firms
Trusts-Estates-Wills-Elder Law firms
All Other firms
The form will give the insurers enough information about your practice to offer “ballpark” terms, without your having to complete a full application.
We’ll send your form to all suitable insurers, and contact you as they respond. If you like any of the estimates that we obtain, then you can complete a full application and provide any other information that the insurer needs to offer you a firm, final quote. The final quote usually matches or is very close to the estimate.
NOTES:
If you filled out an application or premium estimate form for another broker, send us that, instead of filling out our form.
All quotes that we obtain for you are no-cost, no-obligation.
If you accept any of them, then the insurer that offered it will pay us a percentage of the premium as a commission.
That’s our only compensation; we don’t charge any fees.
We thus have every incentive to find you the best terms available in the market.
IV. Legal Malpractice Insurance Cost – Reduce Your Risk of Committing Malpractice
- Top 10 Ways to Avoid Legal Malpractice
- 10 Tips to Avoid Lawyers Can Avoid Committing Malpractice
- Legal Malpractice on Trial: Avoiding Claims
- Top Tips For Avoiding Legal Malpractice Claims
- What Is Legal Malpractice and How Can Lawyers Avoid It?
- Legal Malpractice Traps and How To Avoid Them
- 21 Tips to Reduce Your Malpractice Claims Risk in 2021
Calendaring/Docketing Best Practices
- You Get What You Pay For – Best Practices In Choosing a Calendaring Solution
- Best Practices In Legal Calendaring Management
- How To Minimize Docketing Errors
- Lawyers Mutual Calendar and Docket Management and Forms
- Best Legal Calendaring and Docketing Software – 2019 Comparison
Conflict of Interest Avoidance Best Practices
- How Lawyers Should Deal With a Conflict of Interest
- Conduct Deep, Wide, and Ongoing Checks to Avoid Conflicts of Interest
- Conflict of Interest Avoidance Best Practices
- How To Do A Law Firm Conflicts Checks
- Features of a Good Conflict of Interest Checking System
- From Paper to Computers – Conflict of Interest Checking Options
Engagement Letter/Retainer Agreement Best Practices
- Why Attorney Retainer Agreements Must Be in Writing
- The Well-Drafted Retainer Agreement
- Sample Attorney Engagement Letter
- Attorney Engagement Letter Checklist
- New York State Bar Association Sample Engagement Letter
- American Bar Association Engagement Letter Primer
Billing Practices to Increase Realization Rates and Avoid Fee Suits
- 10 Best Law Firm Billing and Invoicing Practices
- 7 Invoicing Best Practices for Law Firms
- Best Practices For Client Billing
- Better Billing Practices For Law Firms
- The 5 Best Billing Practices for Profitable Law Firms
- Lawyerist’s Reviews of Legal Time and Billing Software Programs
FURTHER READING
- Understanding Your Legal Malpractice Insurance Policy Part I: Claims-Made v Occurrence Coverage
- Understanding Your Legal Malpractice Insurance Policy, Part II: Claims-Made Policy Coverage Triggers
- Understanding Your Legal Malpractice Insurance Policy, Part III: Claims-Made Policy Coverage Gaps
- Understanding Your Legal Malpractice Insurance Policy, Part IV: Avoiding Claims-Made Policy Coverage Gaps
- Behind the Numbers: How Claims-Made Coverage Affects Your Malpractice Insurance Premium
- Legal Malpractice Insurers
- Legal Malpractice Insurance Policy
- Legal Malpractice Insurance FAQs