Do I need liability insurance lawyer? When it comes to liability insurance, many people don’t know when or if they should consult a lawyer. Liability insurance is designed to protect you against financial loss if you are held responsible for damage or injury to another person or property. However, it can be confusing to understand when and how to use liability insurance, which is where a liability insurance attorney can help.
In this blog post, we explore the different situations in which you may need to consult liability insurance, as well as the benefits of working with an attorney. We also discuss the different types of liability insurance and the role of a lawyer in navigating the claims process.
What is Liability Insurance?
Before we get into when you need a liability insurance attorney, it’s important to understand what liability insurance is. Liability insurance is a type of insurance that protects against financial loss if you are held responsible for damage or injury to another person or property. This may include coverage for things like car accidents, slip and fall accidents, and property damage.
There are several types of liability insurance, including:
- Auto Liability Insurance: This type of insurance is required by law in most states and covers damage or injury you may cause while operating a vehicle.
- Home or tenant insurance: This covers damage or injury that may occur to your accommodation, including those caused by you or your guests.
- Professional Liability Insurance: This insurance covers damage or injury that may occur to your company property or as a result of your business activities.
What Is Professional Liability Lawyer Cover And Do I Need Liability Insurance Lawyer?
Professional Liability Insurance (LPL) for attorneys, also known as malpractice insurance, can help protect an attorney or law firm from costly consequences if a client sues the firm or attorney for errors or apparent errors that may have occurred in the representation. Professional indemnity insurance may cover the costs of defense against attorneys or law firms and any resulting payments or premiums. This policy also helps protect against employee theft or internal fraud that could damage the reputation of an attorney or law firm.
LPL insurance is not required in most states and Oregon is currently the only required state. However, any attorney in private practice should consider carrying it. The reasons: One misstep can lead to liability, defending a malpractice lawsuit can cost tens of thousands of dollars, and an adverse outcome can cost even more. Even for lawyers who consider themselves “litigable” (although there are few if any), the headaches of a malpractice lawsuit and the potential disciplinary action they could have avoided are worth being covered by malpractice insurance.
When Do You Need A Liability Insurance Attorney?
While liability insurance can provide financial protection in the event of an accident or incident, there may be situations where you should consult an attorney. Some of the most common issues for which you may need a liability insurance attorney include:
- You’re being sued: If you’re facing a lawsuit related to a liability issue, it’s important to consult with an attorney to discuss your options and determine the best course of action. A lawyer can help you understand your legal rights and responsibilities and advise you on how to respond to the lawsuit.
- Your insurance claim is rejected: If your insurance company rejects your claim, it can be frustrating and confusing. A liability insurance attorney can help you understand why your claim was denied and guide you through the appeals process.
- You’re not sure about your coverage: If you’re not sure what your liability insurance covers or if you have questions about your policy, a lawyer can help you understand your coverage and determine whether you have legal options.
- You sustained a serious injury: In the event of a serious injury, you may need a liability insurance attorney to help you navigate the claims process and make sure you get the compensation you need.
Malpractice Insurance Options
There are two types of professional liability coverage:
1) Errors and Omissions (E&O) Liability, which is designed to protect a law firm from claims arising from alleged errors and omissions related to work performed for clients, as well as claims for bodily injury or material damage, and
2) professional liability (also known as general liability), which covers damage resulting from professional services rendered. In addition, the policy typically includes coverage for malpractice, libel, and defamation, personal injury protection, legal defense, and litigation costs, and any settlements or damages awarded to your business.
Professional liability insurance usually contains many important clauses. These include:
The date after which losses can occur and be covered by the policy. Maintaining continuity of coverage and coverage of prior acts is an important consideration, and the date of prior acts must be the original date the law firm was incorporated.
Limitation of Liability
The maximum amount the insurance company will pay for coverage. Limits are usually expressed as “per claim” and “total” (the maximum the insurance company will pay for all claims during the policy term). In certain circumstances, certain types of businesses may have clients who require proof of certain levels of liability insurance, such as outside consultants for corporate clients.
How much does the company pay out of pocket in case of a claim? Fewer and fewer LPL policies offer cover without excess. However, it can still be obtained, usually for a large premium.
Extended reporting period (ERP)
This approval protects against claims made after coverage has ended for matters dealt with during the coverage period. Rider fees are a percentage of the accrued premium and vary depending on the number of years selected.
Coverage of the costs of defending claims, such as attorney’s fees, investigation costs, and expenses.
Coverage of bar disciplinary matters.
Coverage of subpoenas
Coverage of costs associated with responding to a subpoena.
Compensation for lost income
Protects the insured against loss of income as a result of attending court hearings or a lawsuit related to the lawsuit.
Businesses should also be aware of what LPL insurance may not include. For example, many policies will deny coverage if an insured brings a lawsuit against another insured under the same policy or if a lawsuit arises from willful misconduct by the insured. Some policies also don’t allow coverage in certain high-risk practice areas, charging additional premiums to expand coverage in those areas.
The benefits of working with a liability insurance attorney
While you don’t always need liability insurance laws, there are several benefits to working with one. Some of the main benefits are:
- A lawyer can help you understand your legal rights and responsibilities: A liability insurance lawyer can help you understand your legal rights and responsibilities in the event of an accident or incident. They can also advise you on how to respond to a lawsuit or insurance claim.
- A lawyer can help you navigate the claims process: The claims process can be complex and confusing. A liability insurance attorney can walk you through the process and help you understand the steps you need to follow to file a claim.
- A lawyer can help you negotiate with insurance companies: Insurance companies are in business
Factors to Consider When Choosing an LPL Carrier
A lawyer should never buy LPL insurance on price alone. Here are some reasons:
Level of protection
If you can’t afford to pay for a potential claim out of pocket (how many lawyers can?), then you need adequate LPL cover. The purpose of insurance is to transfer the financial risk that you cannot afford to bear, and without formal LPL cover you will still pay in the event of a claim, and the cost will likely be much higher than the premium that you pay monthly.
Price is important, but you should never buy a policy because you think it’s a bargain. Always make sure your carrier is financially sound so they’ll be there if and when you file a claim. Also, not all carriers are strong in all ranges, so make sure the company you buy your LPL cover from specializes in the type of cover you want.
Claim payment history
When you buy insurance, you buy a promise that the company will pay valid claims. So even if you can find a cheaper policy, if that company doesn’t have a history of honoring claims from its policyholders, are you saving money?
If your business is considering changing LPL carriers, full coverage of past transactions should be included in the new policy if possible. Once a prior action date is set, it must be maintained on all future policies, whether you stay with the same LPL insurer or switch to a new carrier.
How much does LPL cost and what coverage do I need?
Although LPL insurance is not cheap, it can be essential for law firms. The most crucial document insurers use to determine the law practice insurance premium is the application, and the accuracy of your answers will help ensure an acceptable price.
According to the American Bar Association (ABA), the factors that generally determine the rate you will be charged for LPL coverage are:
Selected liability limit
In general, a higher liability limit will result in higher insurance costs.
Those who practice in high-risk areas such as securities, banking, personal injury, and real estate can expect to pay more for coverage. Additionally, some lawyers may have to pay an additional premium to get the specific coverage they need.
The personal claims history of all lawyers in the firm.
The state of the insurance market
In “soft” markets, rates are generally lower and more coverage available than in “hard” markets, where even renewing an existing policy can be difficult or expensive.
The higher the deductible you are willing to pay, the lower your premium.
Years of experience
Contrary to popular belief, the cost of malpractice insurance for new attorneys is often lower than for more experienced attorneys because seasoned attorneys are more likely to take on more complex cases.
The claims experience of other attorneys practising in your geographic region and the litigation environment in your jurisdiction will place you in a particular risk pool.
Some companies offer more competitive rates for companies that employ more lawyers.
If your company has controls in place to prevent malpractice, such as automated conflict checks that help eliminate costly errors, you may be eligible for insurance premium credits.
How much LPL coverage should you buy? The answer to this question depends on two things: your practice and your financial situation. You should perform a risk-benefit analysis to assess the value of your assets and the level of cover you need to protect your customers.
Control the costs of your lawyer’s professional indemnity insurance
LPL insurance is generally not too expensive and most LPL carriers accept monthly premium payments, which makes it much cheaper than defending a malpractice claim.
Here are some ways to reduce the cost of your LPL insurance:
Be careful when classifying lawyers
Insurers typically set a law firm’s premiums based on the number of full-time attorneys on staff. Some insurers distinguish between different legal relationships, including “attorneys”, contract attorneys, and retired or part-time attorneys. The risks associated with these types of lawyers are generally different from those of a full-time practicing lawyer. A law firm that treats all of its attorneys equally, regardless of role or roster, may pay a higher LPL premium than necessary.
Assess your law firm’s practice areas
LPL insurers generally assess the risk of underwriting particular practice areas and base their decisions on two factors: the frequency of claims and their severity. Specific practice areas, such as personal injury, family law, and real estate, may have a higher frequency of claims. In contrast, other AOPs, such as intellectual property, environmental law, and securities, tend to have more serious grievances. If your business engages in non-essential areas of practice, it may be worth considering whether that practice involves unnecessary risks without adequate returns.
Choose available rewards
Some LPL carriers offer companies lower premiums based on their claims history or regular business, while others offer specific premium credits tied to the law firm’s risk management efforts. For example, if a law firm can demonstrate its dedicated use of risk management tools, such as formalized billing practices, a schedule numbering system, role verification, and a dispute resolution process, it may qualify for a discount on malpractice insurance premiums.
How to avoid Legal Malpractice Claim
Mistakes and mistakes happen, but without LPL coverage, those mistakes can lead to the loss of a license, a job, or the bankruptcy of an entire law firm. While most lawyers could easily think of many ways that large law firms differ from their smaller, independent counterparts, all large firms face the same type and proportion of malpractice claims.
The largest number of malpractice claims are associated with three jurisdictions: Trusts and Estates, Corporate Transactions, and Companies and Securities. According to the Ames & Gough survey, many insurers have also seen an increase in cases related to insurance defense and tax issues. Many lawsuits filed against tax attorneys relate to rapid changes in tax law during the COVID-19 pandemic, including the Families First Act, Covid Tax Relief Act, America Cares Act, and Child Tax Credit.
But how can lawyers, regardless of jurisdiction, prevent malpractice?
Don’t splash around
Avoid discussing issues that are outside your legal expertise. Generally, the more complicated the cases handled, the higher the payouts from LPL insurers if something goes wrong. Lawyers who regularly stray from their usual practice are on a slippery slope – you don’t know what you don’t know.
Rule 1.4 of the ABA Model Rules of Professional Conduct requires attorneys to disclose material information to their clients, and failure to do so could result in malpractice claims. Law firm practice management software can help you create, schedule, and send automated client communications that keep everyone in the loop.
Given the increasing complexity of many legal issues, even a “simple mistake” can result in a large malpractice payout. Therefore, companies must automate routine tasks to ensure accuracy and save time.
Establish a process to identify conflicts of interest. Every year since the Ames & Gough survey began in 2010, participants have said that conflicts of interest — including alleged conflicts of interest — are one of the most commonly suspected legal malpractices, likely because the courts may view such errors as a breach of an attorney’s duty . . loyalty to a customer.
While LPL coverage is not mandatory, most attorneys prefer not to risk their assets because of the expected risk exposure. Attorneys’ professional liability insurance is essential to protecting an attorney’s financial well-being and can be crucial to protecting an attorney’s professional reputation and livelihood.