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What Is the Need for Professional Liability Insurance for Lawyers

By Arpita Arya


Professional Liability Insurance is one of the most crucial insurance coverages a law firm can carry. Although the responsibilities of a lawyer frequently involve defending their clients in court, lawyers themselves can become defendants when a professional lawsuit is filed against them. Their mistakes can result in their client's loss of money. It is the reason that you can sue them for professional negligence. 


This can also be called as malpractice insurance. It can pay for the cost to defend lawsuits against you and your firm. They also come to your aid when any judgments or settlements arising out of your firm's errors. BizInsure is helping businesses to safeguard against professional mistakes. A law firm opting for a similar kind of insurance policy would do a world of good for its smooth operation. 


What does professional liability insurance cover?


Every insurance company's policy varies from time to time. Hence, you must read your policy carefully or discuss your coverage areas with your agent or broker. Most plans will cover omissions and errors that emanates from your law practice. In the case of a law firm, this sort of insurance will include the attorneys and the firm itself.


Also, most professional liability policies will cover activities that correlate to an acting attorney. These activities usually comprise of the attorney acting as a title agent and serving as a notary public. For a majority of law firms, insurance companies can offer standard policies that are less expensive. These standard policies are for general practitioners.


What are the areas of a law practice which need higher premiums?


Lawyers practicing in certain areas of law that are riskier would have to opt for specific insurance policies. Law firms with a record of substantial claims history may be prohibited to access standard coverages. Moreover, with a history of disciplinary action, they may be restricted to access standard policies. This is where nonstandard policies come to the fore. Here is the list of law practice areas that may need higher premiums.

  • Entertainment law

  • Securities law

  • Personal Injury related to Plaintiffs

  • Estates and trusts

  • Loan modifications and residential real estate

A brief on the limit of liability that can be claimed by lawyers


In case of any eventuality, the limit of liability comes to the aid of lawyers. The limit of liability refers to the maximum sum of money which the insurance organization will pay when claimed by a law firm or attorneys. Notably, the higher the limit of liability, the higher a law firm's insurance premium is. 


The legal defense is included within the boundary of liability because many claims are dismissed or result in small settlements. Legal defense costs comprise a large portion of professional liability claims to ensure the holistic coverage of the law firm and attorneys. 


What are the aspects not covered by a liability insurance cover?


Here is the list of aspects that are not covered by liability insurance.

  • Lawsuits or claims between attorneys who are an integral part of a law firm

  • Malicious acts against the clients as well as cases of fraud and dishonesty

  • Claims covered under the general liability insurance like inflicting body injury or property damage

  • Any claims where the law firm was aware of the possibility of it but did not disclose it before the onset of the policy


Liability insurance covers are usually claims-made policies


Professional liability insurances are claims-made policies. In such situations, the event that triggers insurance coverage is the claim filing. The insurance policy, which was active during the time the claim is filed, covers the damages. It varies a great deal from occurrence-based policies where the coverage gets active by an accident or specified event. Here the reporting of the claim doesn't carry any significance. It is so because professional liability usually emanates from a series of events and not a single one.


You should note that some lawyers are sometimes afraid to report claims as they are worried it will increase their premium rates. However, reporting a claim doesn't trigger an increase in the price of the premium. Don't ever ignore a frustrated client or a client full with a vengeance. Report these circumstances to your carrier so that they can provide timely assistance.

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