In an increasingly litigious society practicing law carries risk. To guard against malpractice suits and similar demands, firms seek protection in the form of professional liability insurance.

Purchasing a policy can be a confusing endeavor, particularly for lawyers who have recently started their own practice. While price certainly plays a role in the buying process, cost shouldn’t be the primary consideration.

Here are some points to consider if you need liability insurance for your law firm.

Does the policy feature eroding coverage?

When a client files a malpractice suit, the firm naturally incurs costs in defending against the claims. How these defense costs are treated by liability insurance will vary depending on the type of policy.

• When defense costs are included “inside” the policy, coverage limits for the litigation decrease as defense costs rise.
• Policies that feature defense costs “outside” the policy treat these expenses separately and defense costs do not affect liability coverage limits until costs exceed a predefined cap.

Does the deductible apply to defense costs?

When defense costs are included in the policy’s deductible your firm is immediately responsible for covering expenses from the onset of a suit. Coverage only kicks in once the deductible has been met.

It is possible to have a policy underwritten so that you only pay in the event of a judgment or settlement, meaning that the deductible applies to the liability only.

Deductibles can apply on a case-by-case basis or as an aggregate over the course of the year. In the event that several suits are filed in a single coverage period, this distinction can lead to significantly different financial outcomes.

Experienced lawyers may pay more

Contrary to what you might assume, experienced lawyers present a higher risk to insurers than those who have been in practice for less than 5 years. With more years of service come more clients, more cases and more opportunities to make a mistake.

In general, the more hours an attorney bills, the higher their premiums – but what many firms don’t know is that a savvy insurance broker can often negotiate this stipulation out of the policy, particularly for firms covering a number of lawyers.

Are prior acts covered?

Some policies cover potential liabilities from former cases and others don’t. While policies that don’t cover prior acts are certainly less expensive, taking this option could leave firms with a gap in coverage.

Is cyber liability included?

Given that law firms retain sensitive data from their clients, the potential for a costly hack is high. If cyber liability is not included in the primary policy, a rider should be added or a secondary policy purchased.

Defending and settling a suit

Filing an insurance claim can often mean relinquishing some of the firm’s rights. Depending on the wording of the policy, the insurance provider may be able to force a firm to accept a settlement proposal in lieu of going to trial. Carriers can also stipulate that they, and not the firm, will select and hire defense counsel in the event of a suit.

If you would like to learn more about liability insurance for your firm, contact the experts at John B Wright Insurance.