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Law firms often handle malpractice insurance for their attorneys. When an attorney decides to open a solo practice or start a new law firm, however, insurance coverage often represents a significant ongoing expense. The lawyer must identify the insurance rules in her state and decide whether to purchase professional liability insurance, as well as choose the desired amount of coverage. The chosen amount of liability coverage will often affect the premium to be paid.
Purpose of Malpractice Coverage
Attorneys and law firms buy malpractice insurance to provide coverage if former or current clients file lawsuits against them. A party might sue an attorney due to monetary losses stemming from a matter handled by the attorney. In addition, a party might file a lawsuit based on a lawyer's error or omission during legal representation. Malpractice insurance provides financial coverage to settle a claim or pay for a court-ordered award. An insurance policy often also designates a specific amount of money to be used toward the policy holder's legal fees in the event of a lawsuit.
State Bar Requirements
Some attorneys and law firms might be hesitant to pay for malpractice insurance due to the expense of the premiums. Insurance might represent a significant cost to a new attorney or a law firm experiencing financial difficulties. Whether an attorney must buy malpractice insurance depends on the licensing requirements and rules established by the bar association of the state or jurisdiction where the attorney plans to practice law or maintain a law license. If the state bar doesn't require professional liability insurance, the attorney may choose whether to carry insurance coverage. Some bar associations may allow lawyers to practice law without insurance, but they might need to inform their associations regarding the lack of insurance.
Required Disclosures
When a state bar doesn't impose mandatory insurance on its members, the bar association might set requirements for disclosures by attorneys who don't have malpractice insurance. The state bar rules might require reporting to the bar association in the event that the attorney's insurance coverage changes or ends. Some state bars also require disclosures to clients regarding professional liability coverage. The State Bar of California, for example, requires a written disclosure regarding lack of malpractice insurance to a client at the time of engagement if the lawyer reasonably foresees that the representation will require at least four hours of the lawyer's services.
Additional Coverage Options
When a state bar's licensing requirements include malpractice insurance coverage, the attorney must look to the bar association's rules to determine the amount of coverage that must be purchased and maintained. In addition to the required coverage amount, an attorney or law firm often has opportunities to buy additional coverage for further protection. These options include prior-acts coverage and extended-reporting endorsements in the event that the attorney changes insurance carriers or closes a law practice. While additional coverage can offer a measure of financial protection or peace-of-mind, an attorney may want to find out whether the state bar association specifically requires prior-acts coverage or tail coverage before making a decision.
Purpose of Malpractice Coverage
Attorneys and law firms buy malpractice insurance to provide coverage if former or current clients file lawsuits against them. A party might sue an attorney due to monetary losses stemming from a matter handled by the attorney. In addition, a party might file a lawsuit based on a lawyer's error or omission during legal representation. Malpractice insurance provides financial coverage to settle a claim or pay for a court-ordered award. An insurance policy often also designates a specific amount of money to be used toward the policy holder's legal fees in the event of a lawsuit.
State Bar Requirements
Some attorneys and law firms might be hesitant to pay for malpractice insurance due to the expense of the premiums. Insurance might represent a significant cost to a new attorney or a law firm experiencing financial difficulties. Whether an attorney must buy malpractice insurance depends on the licensing requirements and rules established by the bar association of the state or jurisdiction where the attorney plans to practice law or maintain a law license. If the state bar doesn't require professional liability insurance, the attorney may choose whether to carry insurance coverage. Some bar associations may allow lawyers to practice law without insurance, but they might need to inform their associations regarding the lack of insurance.
Required Disclosures
When a state bar doesn't impose mandatory insurance on its members, the bar association might set requirements for disclosures by attorneys who don't have malpractice insurance. The state bar rules might require reporting to the bar association in the event that the attorney's insurance coverage changes or ends. Some state bars also require disclosures to clients regarding professional liability coverage. The State Bar of California, for example, requires a written disclosure regarding lack of malpractice insurance to a client at the time of engagement if the lawyer reasonably foresees that the representation will require at least four hours of the lawyer's services.
Additional Coverage Options
When a state bar's licensing requirements include malpractice insurance coverage, the attorney must look to the bar association's rules to determine the amount of coverage that must be purchased and maintained. In addition to the required coverage amount, an attorney or law firm often has opportunities to buy additional coverage for further protection. These options include prior-acts coverage and extended-reporting endorsements in the event that the attorney changes insurance carriers or closes a law practice. While additional coverage can offer a measure of financial protection or peace-of-mind, an attorney may want to find out whether the state bar association specifically requires prior-acts coverage or tail coverage before making a decision.
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