Legal Malpractice Insurance FAQs: answers to questions about coverage, limits, cost, prior acts, cost, etc.

Legal Malpractice FAQs is published by Lawyers Insurance Group, legal malpractice insurance brokers. Our mission is to obtain the best terms available in the market for your firm. We accomplish this by scouring the market on firms’ behalf, leveraging our access to dozens of “A”-rated legal malpractice insurers. 

We also assist with special situations: limits > $5M, coverage non-renewed, office outside U.S., merger/acquisition, low-cost tail coverage, etc. 

To obtain quotes, fill out and submit our short on-line application.

Click here for coverage for in-house counsel, or here for coverage for legal aid societies.

Click on any link below to go to the section of the page where the answer is.
1. What does legal malpractice insurance cover?
2. Who does legal malpractice insurance cover?
3. How does legal malpractice insurance benefit me?
4. Why do I need legal malpractice insurance?
5. When should I buy legal malpractice insurance? 
6. How do I buy legal malpractice insurance?
7. What policy limits should I buy?
8. What else do I need to know about policy limits?
9. What deductible should I buy?
10. What is claims-made coverage?
11. What is prior acts coverage?
12. What is Extended Reporting Period (Tail) Coverage?
13. How much does legal malpractice insurance cost?
14. How do I obtain the best possible terms?
15. Can I pay my premium with a credit card?
16. What if I need higher policy limits, hire an attorney, or open a new office during the policy period?
17. Can I get coverage if my license was suspended?
18. What should I do if I forget to renew my policy before it expires?
19. Do the insurers require me to use a calendar, conflicts-checking system and engagement letters?
20. Can I get coverage if I’ve sued clients for unpaid fees?

I. Legal Malpractice Insurance FAQs: What does it cover?

Defense costs and indemnity payments incurred to resolve claims filed against an attorney for acts/errors/omissions made in the course of providing legal services on behalf of the named insured, i.e., the entity (firm or individual) that bought the policy.

“Claim” is a defined term in most policies, which generally means “a demand for money damages” made on an attorney covered by the policy, due to an act or omission in providing “legal services”, which is itself a defined term. The demand doesn’t have to be made by a client, and the claim doesn’t have to be meritorious.

Here’s a representative definition of “legal services”, from CNA’s policy:

  • A.”services, performed by an Insured for others as a lawyer, arbitrator, mediator, title agent or other neutral fact finder or as a notary public. 
  • B. services performed by an Insured as an administrator, conservator, receiver, executor, guardian, trustee or in any other fiduciary capacity and any investment advice given in connection with such services;”

Most, but not all insurers define “legal services” as broadly as CNA. Always read the definition of legal services before buying a policy, and see if all of the services that you provide as a lawyer are covered. If not, don’t buy that policy.

Services performed in any other capacity, i.e., real estate broker, insurance agent, etc., aren’t covered by a legal malpractice insurance policy. You’ll have to buy a separate policy to cover such services. Too, while a lawyer who’s also a title agent is usually covered, a title agency isn’t covered. However, if your firm owns a title agency, its legal malpractice insurer may cover it for an additional premium.

Note that “Insured” is a defined term in the policy (see next question).

Other language in the policy will also affect whether or not a claim is covered, even if the above definitions are satisfied.

The policy also covers defense and related costs incurred in responding to a bar or other disciplinary grievance. This is included at no additional charge, although the limit varies by insurer, from $10,000 to $100,000.  

The policy typically covers a firm’s past and present attorneys, partners, directors and officers, Of Counsel, contract attorneys, non-lawyer employees, etc., plus the firm itself, and any predecessor firm.

A. Asset protection: without insurance, you’ll have to fund your own malpractice claim defense and any indemnity payment made to the plaintiff, which will exhaust the assets of most lawyers.

B. Professional claim handling v. handling the claim on your own: legal malpractice in-surers employ professionals who handle claims all day, every day, and have contracts with law firms that specialize in defending these claims. You don’t.

C. Protection for your clients: even the best lawyer can make a mistake that can’t be reversed, and harms a client. If that occurs, the ethical thing to do is to make the client whole; that’s what legal malpractice insurance does.

Some attorneys believe that having malpractice insurance invites malpractice claims, i.e., a disgruntled client won’t sue you if you don’t have malpractice insurance. That’s a myth. Many disgruntled clients will pursue an uninsured attorney’s personal assets, purely out of spite.

To do as some attorneys do, and close your practice, and if necessary, declare bankruptcy, if you get sued and a judgment is awarded against you, is both unethical and a poor business strategy, because the financial and reputation costs of doing so far exceed the cost of malpractice insurance.

D. Client acquisition: some clients won’t hire you, and many attorneys won’t refer cases to you, unless you have malpractice insurance. Too, many courts require you to have it to be listed on their panels.

Even if you’ve never been sued by a client, and pride yourself on running a safe practice,  you never know when you’ll make a mistake or encounter a client who’ll sue you, even if you’ve done nothing wrong.

If that happens and you’re uninsured, then you’ll bear the time, effort, cost, and stress of handling the claim on your own, and all of your personal assets will be at risk.

That’s an enormous gamble to take, when you can instead pay a relatively modest pre-mium for a policy that will let you avoid those risks.

According to legal malpractice plaintiff’s attorney Daymon Ely, in an article for the New Mexico Bar:

“I am still seeing lawyers suggesting that if they don’t have insurance they won’t be sued. I am a plaintiff ’s attorney who sues attorneys, and I know this is not the case. I, and the other attorneys I know who sue attorneys, will sue you if there is a case. The fact that you do not have insurance will not discourage us from pursuing the case to judgment and, if necessary, into bankruptcy.

There is certainly a lack of understanding that any lawyer can be sued, even if he or she has only a limited practice…Unfortunately, no matter how limited, careful or wonderful your relationship is with your client, if you are practicing law, then you can make a mistake. If the mistake rises to the level of a cause of action, you are: (1) risking your assets, and (2) increasing the risk that you will wind up representing yourself.

I am consistently surprised that lawyers do not understand they have an obligation to protect their clients that exists independent of protecting themselves…I see many clients who…have lost everything because of their lawyer’s behavior. Without insurance, they get to look forward to judgments, a payment plan over many years, and bankruptcy, either the lawyer’s or their own.

…malpractice insurance is simply part of the cost for the privilege of representing people.”

New attorneys: as soon as you begin marketing, because that’s when your exposure be-gins, i.e., a prospect can mistakenly believe that you took their case, and then sue you for not protecting their interests. The suit may be lack merit and thus, easily defeated, but without insurance, you’ll have to fund that defeat out of your pocket.

Once you’re “out there” marketing your services, you’re exposed to malpractice claims and bar grievances, so you should be protected.

Buying malpractice insurance before that is a poor use of your cash flow; buying it after that is imprudent.

Experienced attorneys starting a new firm: you should have coverage in place on the date that you open for business, because you’re presumably bringing clients – and perhaps cases – with you from your old firm, which mean that you’ll have malpractice exposure from “day 1”.

A. There are four ways to buy your policy:

1. Directly from certain insurers – a few insurers sell coverage directly to attorneys, i.e., they don’t accept applications from insurance agents or brokers. There are several such insurers that operate in about 30 states each, and several state bar associations have an affiliated malpractice insurer (see II.B and C. of our Legal Malpractice Insurers page for a complete list).

These insurers generally offer competitive coverage and premiums, and some law firms like dealing directly with their insurer.

However, the application process is time-consuming: if you seek quotes from, i.e., three direct insurers, you’ll likely have to fill out an application and any required supplements for each one. You’ll also have to evaluate each insurer’s quote and policy on your own.

Further, you’ll have to deal with each insurer’s customer service reps., who are licensed insurance agents, i.e., salespersons, and will try to sell you that insurer’s policy, even though you might be able to obtain better terms from another insurer.

2. Insurance agents – some firms buy their malpractice coverage from the same agent that procures their business insurance (commercial property, general liability, and workers compensation coverage). This is especially true if the agent represents CNA, Travelers, Hartford, or another insurer that offers both business and legal malpractice insurance.

Firms that buy this way may obtain competitive terms. However, these insurance agents serve many different types of businesses, and thus are rarely experts in legal malpractice insurance. Too, they generally have access to only a few legal malpractice insurers, so it’s impossible for you to know if the quotes they obtain for you are the best that are available in the market.

3. Program administrators – many legal malpractice insurers outsource their underwriting, policy issuance, and customer service to a Program Administrator (PA), usually run by former insurance company underwriters.

PAs accept applications from brokers like us, but they also have their own licensed insurance agents who market their program (some of them may have “cold-called” you).

You’ll get the same quote from an insurer whether you contact its PA or a broker like us, but if you deal with its PA, its agent is going to try to sell you that insurer’s policy, even if another insurer might offer you better terms. That’s because if you buy through the PA, they’ll collect a double commission from the insurer: one commission for underwriting your application, providing the quote, and issuing the policy, and a second commission for their agent’s ‘customer service’ work in bringing you into the program. If you buy through a broker, the broker receives the second commission, not the PA.

So, you may receive a competitive quote, but you also may be able to obtain much better terms from other insurers.

4. Insurance brokers – brokers (which is what we are) represent insurance buyers, i.e., law firms.

The primary advantage to using a broker is that they generally work with many insurers, i.e., we have access to more than 20 legal malpractice insurers, including many that don’t use a program administrator.

Firms thus have a much better chance of obtaining the best terms available in the market, if the broker is willing to scour the market on firms’ behalf to find them. We are)   

Further, it’s convenient to work with a broker: all you have to do is complete one application, and then wait for the quotes. Your broker will deal with the insurers, etc.

A skilled broker will also answer all of your questions, and offer you objective advice about the policy language, coverage options, policy limits, etc., so you’ll be able to make the optimal choice.

B. Complete an application and any required supplements.

A supplement is required if you’ve incurred any recent malpractice claims or disciplinary actions, share office space with a firm, serve as officer or director of a client, etc., or if 1% or more your billings in the last fiscal year came from real estate, personal injury, trusts and estates, or certain other practice areas that the insurers regard as higher-risk to incur malpractice claims (see the full list of supplements on our  applications page). 

You’ll be able to easily answer most of the questions on the application, but if you practice more than one area of law, you may have to review your billing records to complete the application’s practice areas grid, which requires you to allocate your firm’s total billings for the preceding year by percentage among the practice areas in which it generated billings.

Further, if any of your practice areas are considered to be higher-risk for malpractice claims, you’ll have to complete a supplemental application, which will require you to allocate your billings among certain categories within that practice area , i.e., commercial real estate v. residential real estate, and perhaps further, i.e., among closings, foreclosures, etc., within residential real estate. And if you handle PI cases, then you’ll have to provide your average settlement value, the percentage of cases you try v. settle, etc.

Thus, if you have to complete one or more supplements, you’ll save time by gathering the necessary information beforehand.

Alternatively, you can fill out fill out our on-line application, or download our one-page premium estimate form:

Family Law Online Application
IP Law Online Application
Real Estate Law Online Application
Trusts & Estates Law Online Application
All Other Practice Areas Online Application 

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 quote. The final quote usually matches or is very close to the estimate.

Regardless of which buying option(s) you choose, keep in mind that comparison shopping, i.e., soliciting quotes from 8 -12 insurers, depending on your firm’s risk profile, is the key to getting the best terms.

The minimum malpractice insurance limit is $100,000 per claim/$300,000 annual agg-regate. This means that the insurer will pay a maximum of $100,000 for defense and indemnity costs for any one claim made against your firm, and a maximum of $300,000 for all claims made against your firm during the policy year.

The next level of limits is $250,000/$250,000, then $250,000/$500,000; $500,000/$500,000; $500,000/$1M; etc., up to $10M/$10M, which is the maximum that most legal mal. insurers offer. We can procure higher limits in the excess insurance market.

The right policy limits for your firm depend mainly on its attorney count, practice areas, annual revenue, average case value, and the firm owners’ risk tolerance. Client requirements may also be a factor.

Your firm’s broker should review the firm’s practice every year, and tell you if its limits are adequate. If they’re not, have your broker solicit quotes for higher limits, and then decide if they’re worth the higher premium.

Here are some guidelines:

For many new solos entering private practice, the minimum limit of $100,000/$300,000 is sufficient, because they generally don’t have a lot of cases in their first year of practice, and those that they do have tend to be of lower-value. New solos who expect to handle high-dollar value cases in their first year should purchase higher limits.

Solos who’ve been in private practice with a firm and are opening their own practice, should buy more than the minimum limits, because they’re likely bringing clients – and perhaps cases – with them from their old firm, and handling higher-value cases in their first year. The higher-risk their practice area, and the higher-value their cases, the higher limit they’ll need, i.e., new solos practicing Securities or IP law should buy a limit of at least $500,000/$500,000. 

Partnerships, etc.
The above guidelines also apply to non-solo firms, except that they need higher limits, due to their greater number of lawyers, i.e., a minimum limit of $250,000/$250,000 or $250,000/$500,000 for a 2-lawyer firm, $500,000/$500,000 or $500,000/$1,000,000 for a 3-lawyer firm, etc.

Note that 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 increa-ses the premium by about 10%.

Request quotes at different limits, and then compare the premiums so you can make the best decision.

Here are some specific guidelines, based on the limits carried by firms that we’re the broker for:

  • Plaintiff med. mal firms and PI firms that handle high-value, high-malpractice risk  cases, generally carry $750,000 – $1,000,000 coverage per attorney.
  • Patent firms generally carry $500,000 – $750,000 coverage per attorney.
  • Firms that specialize in tax, high-value divorce, trust-estates, or real estate matters generally carry $500,000 – $750,000 coverage per attorney.
  • Firms that specialize in low malpractice-risk cases, i.e., appellate, criminal defense, or immigration, generally carry $250,000 coverage per attorney, although some carry $500,000 – $1M per attorney, due to the comparatively low cost of the coverage. 
  • Firms in other practice areas generally carry $250,000 – $500,000 coverage per attorney.

The limits per attorney tend to decrease as firm size increases. For example, many solo attorneys that specialize in a high-risk practice area carry a $1M limit, but four-lawyer firms in the same practice area generally carry $3M limits, not $4M limits, and 10-lawyer firms in that practice area are likely to carry $5M – $6M limits, not $10M.

Note: You should raise your firm’s limits as its headcount, revenue, and prior acts exposure increases.

A. Most legal malpractice policies have “claim expenses within the limits” (CEIL), meaning the insurer deducts legal fees and related costs from the per-claim limit as it pays them, which leaves that much less to pay indemnity costs (a judgment or settlement).

Too, once the per-claim limit is exhausted, the policy will no longer pay either claim expenses or indemnity costs, so the firm will have to fund any additional costs out-of-pocket.

That’s why these are also called “eroding limits” policies.

Policies that have “claim expenses outside the limit” (CEOL), don’t have legal fees de-ducted from the per-claim limit, so the entire limit is available for indemnity costs; further, there is no limit on defense costs. This is the broadest – and most expensive – cover-age, but if you have it, you can buy a policy with a lower limit, which partly offsets the extra cost.

Most insurers underwrite CEOL coverage case-by-case; you have to request it, and they may decline to offer it.

When deciding what policy limit to buy, determine whether the quotes you get are for policies that have CEIL or CEOL; if they’re for CEIL, consider buying a higher limit to offset the risk of “eroding limits”.

Note: some insurers offer a modified version of CEOL, i.e., a policy with a separate limit for defense costs euqal to the per claim limit. Example: if a firm buys a policy with a $500K/$1M limit, it may receive a separate $500K limit for defense costs, leaving its entire per claim limit of $500K avail-able to pay any judgment or settlement. If defense costs exceed $500K, the separate limit will be used up, and any further defense costs will be paid out of the per claim limit, thus eroding it.

Modified CEOL is less expensive and easier to obtain than CEOL, and may be a good option for your firm.

B. If a policy’s per claim and aggregate limits are the same, i.e., $500,000 per claim/$500,000 aggregate, then it has even limits; if they’re different, i.e., $100,000/$300,000 or $500,000/$1,000,000, then it has uneven limits.

You need an uneven limits policy only if you’re at risk to incur more than one malpractice claim during the policy period, which is one-year.

For example, you’ll need limits of  $500,000/$1,000,000, only if you incur one $500,000 claim, which is the per claim limit, and then a second claim, which would be paid for by the $500,000 remaining on the aggregate limit.

If you’re unlikely to incur more than one claim in a year, then you’ll pay for coverage that you don’t need, if you buy an uneven limits policy. You should instead buy a policy with even limits, i.e., $250,000/$250,000 or  $500,000/$500,000, not $250,000/$500,000 or $500,000/$1,000,000.

Buy an even limits policy if you handle primarily fewer, higher-value matters, such as  patent, securities, medical malpractice, or real estate development, i.e. $1 million/$1 million or $2 million/$2 million, not $1 million/$2 million.

Buy an uneven limits policy, if you handle a large volume of lower-value matters, i.e., residential real estate closings, low-value PI, or consumer bankruptcies.

A deductible applies to every claim.

The minimum is $1,000; 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 in-surers will offer only as a high a deductible as they believe a firm can afford to pay, based on its annual revenue, etc. Nearly all firms whose malpractice insurance pre-mium is below $10,000 have a deductible of $1,000, $2,500, or $5,000 per claim, be-cause insurers won’t offer them anything greater.  

There are three types of deductibles:

1. Loss & Expense Deductible: applies to indemnity payments (loss) and claim ex-penses, i.e., legal fees; most legal malpractice policies have this type of deductible. The firm must pay all losses and claim expenses until the deductible has been fully paid; the insurer won’t make any payments until then. Most firms satisfy their deductible by paying legal fees, because they’re usually the first expenses that are incurred on a malpractice claim.

2. Annual Aggregate Deductible: applies to loss and claim expenses, which the firm pays until it has reached the annual aggregate. No further deductible applies during the policy period, even if the firm incurs more claims.

3. Loss Only Deductible, a/k/a First Dollar Defense: applies to indemnity payments, but not claim expenses, which the insurer pays from the first dollar. Claim expenses are usually incurred on a malpractice claim before any indemnity payment is made, and of-ten no indemnity payment is made, because the law firm prevails. Thus, a firm that has this type of deductible usually doesn’t pay anything, which is why insurers charge extra for it.

Note: the size of the deductible doesn’t have a major effect on the premium, so you’ll save only about 3% if you double your deductible, 6% if you quadruple it, etc.

However, there are still savings to be had, so it’s worth looking into, i.e., as your firm’s annual revenue increases.

A deductible equal to 1.5% – 2.25% of your firm’s annual revenue is a reasonable guideline, i.e., $10,000 if your revenue is $500,000, $25,000 if it’s $1M, $50,000 if it’s $2M.

If that’s higher than your current deductible, and the extra risk makes you apprehensive, at least obtain quotes, so you’ll know how much the potential savings are.

Higher revenue gives you more financial wherewithal, and assuming a higher deductible in return for a lower premium is one way to take advantage of that. 

Legal malpractice insurance is a type of Professional Liability insurance, as are medical malpractice, Directors & Officers, employment practices liability, and cyber liability insurance. All Professional Liability policies are written on a claims-made basis.

In contrast, your business and personal insurance – commercial property, general liability, workers compensation, personal auto, and homeowners or renters insurance – is written on an occurrence basis.

These different ‘bases’ affect your coverage, so it will help you to know the difference.

With an occurrence policy, if you have coverage in place on the date that an accident occurs, then you’ll be covered (subject to the policy’s terms and conditions).

For example, if you bought an auto insurance policy on 1/1/17, and rear-ended another vehicle on 1/2/17, then you’ll be covered if the other driver sues you, even if you cancel your policy on 1/3/17, or you’re not sued for one, two, or even ten years after the accident. The only thing that matters is that you had coverage in place on the date of the accident.

However, with a claims-made policy, to be covered for a claim, you must have a policy in place on the day you made the error or omission that led to the claim, and the day you receive notice of the claim, and the day you report it to the insurer.

So, if the SOL on your client’s personal-injury claim tolls before you file suit, and your client sues you for malpractice a year later, and you report the suit to your insurer a day after that, then you must have had a legal malpractice insurance policy in place on all three of those days, without interruption, to be eligible for coverage.

Therefore, it’s imperative that you maintain your legal mal. coverage without interruption, i.e., renew it every year. If you let it lapse even for a day, you’ll lose all of your ‘prior acts’ coverage, i.e., coverage for legal work that you did before the inception date of your current policy (see next two questions).

Prior Acts coverage., a/k/a Retroactive coverage, covers a firm for claims arising out of work that it did prior to the inception date of its current policy (hence the name “prior acts coverage”).

Without it, a firm is covered only for malpractice that it committed on or after the inception date of its current policy. However, most claims arise out of legal work that was done 1 – 4 years prior to the inception date of the firm’s current policy, i.e., there’s usually that long of a lag between the time that an attorney commits a ‘wrongful act’ and the time he/she is sued for malpractice.

Insurers won’t provide prior acts coverage to a firm buying its first malpractice policy, but once it does buy a policy, as long as it renews it every year without letting it lapse, its insurer will offer it prior acts coverage back to the inception date of its first policy, i.e., in the firm’s second year of coverage, it’ll have one year of prior acts coverage, in its third year, it’ll have two years of prior acts coverage, etc. Even if the firm switches insur-ers, the new insurer will offer the same prior acts coverage as the prior insurer. 

Insurers charge extra for prior acts coverage in each of the first four years that a firm renews its coverage, which increases the premium, as we explain in the section on ‘step-rating’ in this blog post. However, buying a policy without prior acts coverage is a poor risk management strategy, so we advise against it.

XII. Legal Malpractice Insurance FAQs: what is Extended Reporting Period (Tail) Coverage?

The period of time after the end of the policy period to report legal malpractice claims that arise out of an act or omission that occurred before the end of the policy period.

Insurers offer two types of ERPs:
A. Automatic extended reporting period: if either you or the insurer cancel or non-renew the policy, the insurer will give you an additional 30 or 60 days to report claims after the policy ends, at no charge, if you haven’t obtained coverage from another insurer. 

B. Optional extended reporting period:  if either you or the insurer cancel or non-renew the policy, the insurer will let you buy an optional extended reporting period, which will allow you to report claims for 1 – 6 years after the policy ends.

The primary buyers of this coverage are solo attorneys who retire or firms that disband, with the attorneys either retiring, joining another firm, or entering another field.

This is also called “tail coverage”, because it trails you like a tail trails an animal. It’s
necessary, because most malpractice claims are reported one or more years after the underlying ‘wrongful act’ is committed. Without it, an attorney who is sued for malpractice after retiring, i.e., when he is no longer insured, will have to defend the claim and pay any settlement out-of-pocket.

However, the coverage is expensive, typically one year for 100% of the premium of the final policy; two years for 150% of the final premium; three years for 175%, six years for 225%, or unlimited years for 250% of the premium.

*The entire premium must be paid in full shortly after your final policy expires.
*The policy limits for the tail coverage will = the limits of your final policy – any claim payments made by the insurer.

In other words, with ‘non-tail’ coverage, if your policy limits are exhausted by claim payments, you get a new set of limits if you renew your policy, which will pay a claim that you incur during the new policy period.

However, you don’t get a new set of limits for tail coverage. So, if the limits of your tail coverage become exhausted due to claim payments, then you have no more funds available to pay future claims, even if that happens in the first year of your tail coverage, and you bought a 2-year or longer tail. 

*Tip: if you know in advance that you’re going to close your practice in a year, consider buying higher limits in your last year of coverage 

XIII. Legal Malpractice Insurance FAQs: How much does it cost?

It’s impossible to tell precisely unless we obtain quotes for you, but for a firm buying its first policy, a competitive quote is $500 – $750 per attorney for a minimum limit policy of $100K/$300K, and $750 – $1,000 per attorney for a policy limit of $250,000/$500,000.

These figures are for a 1-year policy with a deductible of $2,500 per claim, no prior acts coverage, and assume that the attorney(s) aren’t in high-hazard practice areas, i.e., class action, securities, or IP, have no prior malpractice claims or bar complaints, and aren’t located in certain urban or rural areas. 

Firms that buy higher limits, practice in high-hazard areas of law, have incurred mal-practice claims or bar complaints, and/or are located in NYC, LA, South Florida, and certain other locales will pay more than the above figures, while those in some rural areas will pay less.

As a guideline, appellate, criminal defense, and immigration law firms, which rarely incur malpractice claims, pay the least, followed by insurance/civil defense firms. For example, a solo appellate or criminal defense lawyer buying their first policy will pay about $750 for a $1 million/$1 million limit, and around $500 for a $100,000/$300,000 limit, which is the minimum available. 

Class action, securities, and IP law firms pay the most, followed by plaintiffs’ med. mal. firms, and firms handling high dollar value real estate, trusts-estates, and business matters. For example, solo patent lawyers buying their first policy pay about $3,000 for a $1 million/$1 million limit; solo class action and securities lawyers pay about $5,000 – $6,000. However, with aggressive comparison shopping, we’re frequently able to obtain better terms.  

XIV. Legal Malpractice Insurance FAQs: How do I obtain the best possible terms?

A. Provide a complete submission: application, addendum (if necessary; see XIX), all required supplemental apps., and any other required documents (see our Applications page).

B. Allow sufficient time to shop, i.e., at least two weeks.

C. Implement good risk management procedures – docketing and conflicts-checking systems, and engagement letters (see XIX.

D. Solicit quotes from a wide range of insurers:

  • Work with a broker that has access to all of the major legal malpractice insurers, and will scour the market on your behalf to obtain the best terms. Most brokers will send your application to 4 – 5 insurers, and obtain three quotes.That may be sufficient to get you competitive terms, but it rarely gets you the best terms. For that, your application must be sent to all viable insurers for your firm, based on its size, practice areas, location, etc. We typically send each application to 10 – 12 insurers, and obtain 6 – 8 quotes.
  • Apply on your own to one or more “direct writers”, as mentioned above. 

XV. Legal Malpractice Insurance FAQs: can I pay my premium with a credit card?

The premium is usually due 1 – 2 weeks after the transaction has been finalized

You’ll pay the agent or broker who obtained your policy, or the insurer, if you bought directly from it.

Most attorneys pay by check, a few pay by money order or wire transfer. Credit cards generally aren’t accepted, due to the fees charged by the credit card issuers, although you may be able to do so, if you’re willing to absorb the fees, which are generally 3% of the premium.  

Alternatively, you can finance the premium through a premium finance company. The usual terms are a 20% or 25% down payment, which you send to your agent or broker, and the balance paid in nine monthly installments. Finance charges will apply.

It’s essentially a nine-month loan: the prem. fin. company pays the premium less the down payment to your insurer, and you repay the prem. fin. company. Further, you can make your monthly payments by credit card.

The interest rate is usually over 20% for a new firm, because it doesn’t have an established credit history, but under 10% for an established firm.

However, even if the interest rate is high, the loan is paid down so quickly that the total interest paid is modest. For example, here are the terms for a new firm that we recently obtained premium financing for:

Premium: $1,800
Down payment: $450  
Amount financed: $1,350
Interest rate: 27%
Total interest payments: $99

If you want to conserve cash, ask your broker to obtain a premium financing quote for you. Also, if you make all of the payments on time, your firm will develop a good credit rating, which will help if it applies for a loan in the future.

XVI. Legal Malpractice Insurance FAQs: what if I need higher policy limits, hire an attorney, or open a new office during the policy period?

A. Limits: insurers generally won’t raise the policy limit mid-term, unless a client requires it, so if you want higher limits because you’re taking on a high-value case, you generally won’t be able to get them until your policy renews.

If a client requires them, request them from your insurer on firm letterhead, explaining the amount and reason for the request. Your insurer may also require you to provide a copy of the client contract. The cost will be anywhere from several hundred to several thousand dollars, depending on the amount of the increase, etc.

If you request higher limits when your policy renews, because you’re taking on higher value cases or entering a higher-risk practice area, your insurer may or may not provide them.

If your insurer turns down your request, you can either seek quotes from other insurers, or remain with your current insurer, and have a broker obtain an excess insurance policy for you, which will provide the additional coverage. However, its always cheaper to obtain higher limits from your primary insurer than to buy an excess policy, so excess coverage should be your back-up plan.

B. Attorney roster change: if you hire an attorney during the policy period, you must complete your insurer’s “Add Attorney” form to add the atty. to your policy. 

If an attorney listed on your policy leaves the firm during the policy period, notify your insurer on firm letterhead of the attorney’s name and departure date, to have him/her removed from the policy.

Most insurers don’t charge additional premium to add an attorney to the policy or refund premium to remove an attorney from the policy, unless it occurs during the first 30 days of the policy period. However, the change will be reflected in your premium when the policy renews, i.e., if you add an attorney eight months into the policy period, the renewal premium will include a charge for four months of coverage on the prior policy.

C. New office: if you open a new office during the policy period, notify your insurer in writing immediately. Most insurers won’t charge additional premium, but may raise your premium when your policy renews, especially if the new office is in a high-cost area, i.e., NYC, LA, S. Florida, etc.

XVIILegal Malpractice Insurance FAQs: can I get coverage if my license was suspended?

Yes, you can get coverage as soon as your license is reinstated.

We’ve procured coverage for several attorneys who had their license suspended for five years, which in many states is the most severe punishment short of disbarment.

However, the major legal malpractice insurers – CNA, AIG, Travelers, etc. – may be unwilling to offer you coverage, in which case you’ll have to shop in the non-standard or hard-to-place-risks market.  It depends on the reason for the suspension, and how long ago it occurred.

Note: if you live in a state with a bar-affiliated insurer, such as OBLIC in Ohio, apply there first, as it tends to be more lenient than the national insurers in offering coverage to attorney who’ve been suspended, and will charge you a much lower premium than a non-standard market insurer would. 

Call your broker (or insurer, if you bought it directly from them), and ask to have your coverage reinstated. Many insurers allow a grace period of sorts for up to two weeks after a policy expires, during which you can renew.

If you filled out a renewal application, and received a renewal quote before your policy expired, then pay the premium. 

If you didn’t yet fill out a renewal application, then do so immediately, and send it to your broker or insurer.

Having your ‘former’ insurer reinstate you is the only way to preserve your prior acts coverage. For this reason, the one thing you shouldn’t do is call another us or another broker, and ask them obtain quotes for you from other insurers, because those quotes won’t include prior acts coverage.

As mentioned above, if your coverage lapses even for one day, you lose all of your prior acts coverage, unless your “former’ insurer agrees to reinstate you. 

“Yes” to all three:

1. Calendaring/Docket Control – insurers expect every firm to use at least two independent date control tools to ensure that it will meet deadlines for both litigated and non-litigated matters. Acceptable tools include single calendar, dual calendar, pocket calendar, computer (preferred), master listing, and tickler system.

2. Conflicts avoidance – insurers expect every firm to have conflicts-checking procedures in place for both new clients and new matters from existing clients. Acceptable tools are computer (preferred), index file, conflicts committee, and client lists.

Further, insurers expect firms to disclose all actual or potential conflicts to clients in writing, and then either obtain the client’s written consent to perform legal services or decline further representation in writing.

Nearly every insurer’s application asks if you follow these basic risk management procedures. If you don’t, it’ll be harder and more expensive for you to obtain coverage, because some insurers will decline to offer you a quote, and those that do offer a quote will regard you as higher risk to incur a malpractice claim, and thus may surcharge your premium. 

Note: if you have a compelling reason for not utilizing these tools, i.e., you don’t have a docketing system, because you never appear in court, then the insurers may accept that, but you must explain it on your letterhead: write “Addendum to application”, reference the appropriate question number, and write a brief statement. If you answer the question “no” (no docketing system, etc.), and don’t provide an explanation, they’re simply going to assume that you’re a poor risk.  

3. Insurers will also ask if you use an engagement letter, or at least a retainer agreement, on every matter, which explicitly states the scope of legal services that you’ll be providing the client, and your billing rates and practices, i.e., frequency, charges for photocopies and other office expenses, etc. 

They’ll also ask if you use a disengagement or termination letter when your representation in a matter is concluded, and a non-engagement letter when you decline a representation.

If you don’t use engagement letters, write a brief explanation on your letterhead   explaining how you avoid misunderstandings – and malpractice claims – with clients about the scope of an assignment, and how you avoid fee disputes.

Every insurer’s application asks how many fee suits your firm has filed in the last two years, the current status of each one, and what your firm’s plan is to avoid filing future fee suits.

Most insurers won’t penalize your firm, if it has filed 1 – 2 such suits, hasn’t incurred any counterclaims for malpractice, and has a viable plan for avoiding future suits.

If you’ve filed 3 – 4 fee suits, your premium will likely be 15% – 25% higher than it otherwise would be, even if you haven’t incurred any counterclaims for malpractice, because some insurers will decline to offer you a quote, and the others will apply a debit (extra charge) to your premium.

If your firm has filed 5 or more fee suits in the last two years, its premium will likely be be 30% – 50% higher than it otherwise would be, because the standard market insurers probably won’t offer it coverage, which means it’ll have to obtain coverage in the non-standard or “hard-to-place-risks market” where the premiums are much higher.

The more fee suits that your firm files, the greater the risk that it’ll incur a counterclaim for malpractice, and the higher its premium will be. Further, if your firm regularly files fee suits, the insurers will question if it’s well-managed, i.e., wonder why it hasn’t altered its client screening, billing, and/or client communication practices to avoid such suits.

*If your firm currently has coverage, your insurer will likely renew your coverage, even if you report filing three or more fee suits during the current policy year, when you fill out your renewal application, provided that you haven’t incurred any counterclaims for malpractice.

However, after your coverage renews, the insurer will likely contact you about six months into the new policy period, and ask if if you’ve filed any additional fee suits in that time. If you answer “yes”, the insurer may decline to renew your coverage when the current policy ends.

Further, if you filed three or more fee suits during your current policy year, it’ll be difficult to obtain competing quotes, if you shop for better terms.

*Firms with 25 or more lawyers have more leeway than indicated by the figures above, because when a firm reaches a certain size, it’s difficult to avoid filing at least one fee suit in a given year. Also, firms of that size carry a higher deductible, and so will have to bear a greater portion of the cost, if they incur a counterclaim for malpractice.

To learn more about legal malpractice insurance, visit our Legal Malpractice Insurance Center.

If you’re ready to obtain no-cost, no-obligation proposals from A-rated legal malpractice insurers, and get the best terms available in the market for your firm, either apply online or download our premium estimate form in VI.    

We get questions about legal malpractice insurance from attorneys nationwide, and are always glad to answer them.