How to get malpractice coverage
Although there is no regulatory reporting requirement, some insurance industry experts estimate that up to 25% of Georgia lawyers do not have legal malpractice insurance. We’ve already discussed insurance coverage basics and why clients need to ask if their lawyer is covered, so now we can discuss how to get affordable legal malpractice insurance coverage. However, the most important point to take away from this article is: do not buy a policy based on price alone.
There are two primary ways to buy malpractice insurance: (1) you can go direct to a company, complete an application, review a specimen policy, and get a quote; or (2) you can find a broker, complete one or more applications, get a recommendation for a company/policy based on the application, review the specimen policies, and obtain quotes. You can also use both methods simultaneously, because some brokers do not bind coverage for all companies, and some companies do not sell through brokers at all. Neither method of searching for coverage is any better than other, although arguably the incentive to receive a higher commission on the sale of a particular policy could affect the recommendations made by a broker. You could protect yourself from this potential risk by asking for several quotes from the broker, or ask them to disclose their commission rates on each recommendation.
With both methods, the next step is to complete an application which will be used by the insurance company to assess the risk your firm poses, so they can price the policy accordingly. Here are some of the standard topics asked about on the malpractice policy application:
- the limits of coverage desired;
- the deductible desired;
- if a sole practitioner, the name and contact information for a backup lawyer in case you are unable to tend to clients;
- the type of docket control procedures used by the firm;
- the lawyers responsible for docket controls;
- whether you employ procedures to identify potential or actual conflicts of interest;
- whether you use engagement letters, limited engagement letters, non-engagement letters, and disengagement letters;
- the names of the lawyers in the applicant firm, their years in practice, and whether any work is done outside of the applicant’s home state;
- the number of law clerks, paralegals, and clerical staff employed at the applicant firm;
- the percentage of time, gross billable receipts, or billable dollars devoted to listed practice areas on the application;
- the applicant’s revenue for the past three years;
- whether you have filed suit to collect fees in past 5 years;
- whether you are in good standing with the State Bar;
- whether you have ever received a Bar grievance;
- whether you have ever been admonished or reprimanded by any court, State Bar or administrative agency;
- whether you have ever been sued for malpractice;
- whether you or any named attorney engage in business with any clients;
- whether you or any named attorney has entered into any contract or agreement, or or written, guaranteeing the result of any professional service;
- whether you share office space with other lawyers;
- whether any named lawyer has ever purchased an extended reporting endorsement (tail coverage);
- whether you or any lawyer in your firm know of any circumstance, act, error, or omission that could result in a professional liability claim against the lawyer or the lawyer’s predecessors in business. (This is probably the most important question.)
We often talk with lawyers evaluating their insurance coverage, and occasionally hear questions about disclosures of problem cases/clients related to the final item in bold. Of course, disclosure could cause a denial of the application, or a much higher quote. It’s a fact-specific question, but for close situations, disclosure is the best policy. Failure to disclose could result in a denial of coverage when you most need it—after you have received a claim or grievance. Why? The insurance company will take the position that there has been a material change in risk, and could take several courses of action, including cancellation of your policy. Failure to disclose on the application could therefore have disastrous results.
A final recommendation: do not leave the finding, application for, or securing of malpractice insurance to a non-lawyer in your firm. Invariably, non-lawyers do not understand the importance of the questions, or the answers to them.
If you have any questions about this article, please feel free to reach out. Chandler Law is always willing to help. We can be reached at (404) 593-2670.