Introduction to Professional Liability Insurance
Professional liability insurance for attorneys and law firms, often referred to as "legal malpractice insurance" or "lawyer’s liability insurance," is a specialized form of insurance designed to protect legal services providers from financial losses due to claims made against them by clients or third parties.
Key aspects of professional liability policies include:
Coverage Scope: It typically covers claims of negligence, errors, omissions, or breaches of duty in the course of providing legal services, including representation and professional advice.
Defense Costs: The insurance usually covers the cost of defending against a claim, including attorney fees, court costs, and settlements or judgments. This is crucial as legal defense can be expensive, even if the allegations are unfounded.
Tail Coverage: Since malpractice claims can arise years after the actual service was provided, legal professionals often purchase "tail coverage" or an extended reporting period, which allows them to report claims after the policy has expired, provided the act occurred during the policy period.
Exclusions: Like all insurance policies, there are exclusions. Common exclusions include criminal, fraudulent, or malicious acts, services rendered under a different profession, or claims arising from fee disputes.
Limits and Deductibles: These policies have specific limits of liability, which cap the amount the insurer will pay per claim or in total during the policy period. Deductibles may also apply, meaning the insured must pay a portion of the claim costs.
Regulatory Requirement: In some jurisdictions, having this type of insurance is mandatory for attorneys and law offices. Even where it’s not legally required, it is considered a best practice and essential for risk management.
Client Assurance: Carrying professional liability insurance also serves as a reassurance to stakeholders and indicates that the lawyer or law office is prepared to address any potential issues both professionally and financially.
A claims-made professional liability policy for legal professionals is a type of insurance that provides coverage for claims of professional negligence or malpractice that are made against attorneys or their firms during the policy period. Policies of this type – the most common for law offices and independent legal professionals – may include tail coverage and have specific terms regarding policy limits, nature of the claims covered, and other factors.