What Sort of Malpractice Insurance Does a Law Firm Need

Most businesses need a plan for dealing with unexpected situations. Usually, that plan includes insurance policies. But law firms and lawyers face unique circumstances most other professions never face. So what sorts of insurance should law firms obtain to best manage their risks?

Any attorney in private practice should carry malpractice insurance. One misstep in a case could lead to liability to a client who sues for malpractice. Fighting a malpractice case can cost thousands of dollars, and an adverse judgment could cost even more. If a claim does arise, malpractice insurance can serve as an important financial buffer for the lawyer and law firm and can provide for legal defense fees, meaning an attorney with more experience in malpractice cases can handle your case for you.


Insurance policies vary, but many will provide additional or sub-limited coverage for pre- and post-judgment interest, disciplinary proceedings (bar matters), loss of earnings, expenses associated with a subpoena, privacy/cyber protection, and outside director coverage. As with any insurance policy, coverage is subject to the limit of liability, and is for amounts in excess of a deductible.

Most insurance policies offer different options. Some that may be important to consider are:

Prior Acts – This is the date after which losses may occur and be covered under the policy. A very important consideration is to maintain continuity of coverage as well as prior acts coverage. Ideally, the prior acts date should be the initial date the law firm was formed.

Limit of Liability – The maximum amount the insurance company will pay for the coverage. Typically, limits are expressed as “per claim” and “aggregate” (the most the insurance carrier will pay for all claims during the policy period). Each firm will need to decide on an appropriate limit of liability and weigh that requirement against the cost of the insurance. In some instances, certain types of practices may have clients that require proof of certain levels of liability insurance, such as outside counsel for corporate clients. The higher limit of liability will translate into a higher cost for the insurance, but may lead to more lucrative practice areas, as well.

Deductible – The deductible is how much the firm will pay “out-of-pocket” in the event of a claim. Fewer and fewer policies offer zero deductible coverage, but in some instances it can still be obtained, usually at a significant premium.

Extended Reporting Period (ERP) Options – This option protects against claims occurring after coverage ends related to matters that occurred during the coverage period. ERP usually comes in years or “unlimited” varieties. options will be expressed in years as well as an “unlimited” option. The cost for the endorsement will be a percentage of the expiring premium and will vary depending on the number of years selected.

Claim Expenses – Coverage to protect against the cost of defending against claims, such as attorney fees, costs, and investigative expenses.

Disciplinary coverage – Coverage for bar disciplinary matters.

Subpoena coverage – Coverage for expenses associated with having to respond to a subpoena.

Reimbursement for lost earnings – This option protects the insured against lost wages for attending hearings/trial associated with the lawsuit.

Another important consideration in reviewing insurance policies is what exclusions it includes. For example, many policies exclude coverage when one insured sues another insured under the same policy, or if the suit results from some intentional misconduct on the part of the insured. Some policies also exclude against certain high-risk practice areas, requiring additional premiums for coverage in those areas.

Some attorneys believe that having insurance may be the same as inviting a lawsuit because, without it, they may make a less appealing target for recovery. This can be folly, though, as many (even other attorneys) believe those in the field of law to be more highly compensated than they actually are. Thus, even if essentially “judgment proof,” an attorney can be put through the headaches of a malpractice suit (and possibly resulting bar disciplinary action) that might otherwise have been avoided through a settlement facilitated by malpractice insurance.