As many as 55,000 attorneys in the U.S. are likely to face an allegation of professional liability in any given year, and it is estimated that there is a 50 percent chance that a lawyer in private practice for 25 years will be the subject of at least one disciplinary complaint or malpractice claim. This makes lawyers professional liability (LPL) insurance an essential part of any law practice.
Some key issues to consider regarding your LPL insurance:
Terms of Coverage
Policy language may vary, but there are many common provisions and types of coverage. Some commonly covered risks include:
- Coverage for all legal services provided by the firm.
- Individual lawyers or non-lawyers are covered for services not performed on behalf of the firm.
- Acts other than those on behalf of the named insured, such as pro bono activities.
- Other business pursuits with clients of the firm.
- Coverage for any services crucial to the firm.
The policy will name who falls within the definition of “Insured” for the purposes of the LPL coverage. For example, does it include former members of the firm, or contract lawyers hired only to work on specific matters? Or does the definition limit coverage to services rendered on behalf of the firm, excluding outside activities or work with a former firm?
There has likely never been an insurance policy of any kind that does not contain exclusions or exceptions to coverage, making it extremely important to review the entire policy, not just the “Exclusions” section. There may be terms, conditions, requirements, and endorsements included throughout the policy that limit or void coverage. Some common exclusions include criminal acts, intentional or malicious acts, and claims for injunctive or declaratory relief.
Almost all policies have deductibles, and the higher the deductible, the lower the premium. But you should pick a deductible that you can afford to pay, not just one that lowers your premium to a level you prefer. Payment of the deductible is a precondition to the carrier being obligated to paying its limits.
Prior Acts Coverage
Prior acts, also known as “tail coverage,” is coverage for claims that are made after a claims-made policy is terminated, extending the reporting or discovery period. Any lawyer who retires or goes into public service should consider prior acts coverage, and those changing firms need to make certain they will be covered under their old firm’s policy for any errors or omissions that may have occurred while they worked there, and under their new firm’s policy for any accrue after they start at their new firm.