Whether it was an ill-considered tuxedo rental or a momentarily trendy hairstyle, everyone can relate to having made a mistake in their past where the phrase “I should have known better” applies. It’s when those mistakes return to haunt us, either in recently discovered photos or an unexpected lawsuit, that the real pain begins.

Being prepared for past mistakes to reappear is the key to avoid being completely blindsided.

For attorneys, one of the ways to make sure the past can’t wreak havoc on one’s present or future is making sure you have an extended claim reporting endorsement or tail. It’s the best defense for an attorney who retires or otherwise leaves the practice of law.

An extended claim reporting endorsement is rarely found in a standard professional liability insurance policy. Such an endorsement is usually only available for an additional premium, although First Indemnity includes an extended reporting tail in its professional liability policy as standard for attorneys. Other claims-based policies may only offer the extended reporting tail at the insurers’ option. If such policies offer extended reporting, this is often only for a short term that can be as brief as 30-to-60 days after the expiration of an attorney’s professional liability policy.

Having this coverage is critical if an action taken by an attorney later turns into a lawsuit. If a loss or injury occurred while an attorney’s professional liability insurance policy was active for an insurable incident, but the resulting claim isn’t made until after that policy’s expiration, an extended reporting tail would provide coverage. The only exception would be if an attorney has an occurrence-based professional liability insurance policy.

The extended reporting tail often provides all the coverage you had under your professional liability insurance policy. It should also offer an unlimited time frame following the end of your legal career.

Too often, attorneys don’t explore this option either on their existing professional liability policy or as part of their risk mitigation plan when they retire, take an in-house position, enter politics or otherwise leave the private practice of law.

I recommend it to all our clients because you never know what is around the corner. Although you may plan to practice law for 50 years, unforeseen circumstances, like a car accident, family health emergency or even an unplanned relocation, could alter those plans

Better safe than sorry.

No lawyer would step foot in a court room without having done his or her due diligence to protect the clients they represent. Yet a surprising number of attorneys take only a cursory approach to ensuring they have the appropriate level of professional liability insurance to protect their legal practice.

Part of this is because every attorney launches his or her practice committed to ethical best practices. Moreover, many attorneys commonly assume their professional liability policy will provide all the coverage they need in a worst-case scenario. This is not always the case.

Take, for instance, the risk exposure to an attorney from an advertising error. If there’s a mistake in a firm’s advertising that results in a lawsuit, such an error might not be a covered claim in a standard professional liability policy. Even if the claim is considered to be covered, if the costs of the lawsuit are substantial and beyond the limits of the professional liability policy, the attorney in question can be on the hook for the difference – potentially putting him or her out of business.

Another often overlooked area of insurance is the non-practicing tail or extended reporting provision. Because claims can be made against an attorney years after he or she ceases to practice, even new attorneys should consider the importance of this type of coverage.

Many insurers offer a non-practicing or extended tail only as an optional coverage enhancement. In many cases, attorneys may need to maintain consistent coverage with an insurer for a specific period of time to qualify for the non-practicing tail option, if it is offered at all. For an attorney who might be considering retirement or otherwise leaving the practice of law is they may not have the coverage they need for liability claims that are made after they are no longer practicing law or, in some circumstances, after they die or are disabled.

Yet another overlooked area of proper liability coverage for lawyers is commercial auto insurance. This is rarely included in a standard professional liability policy for attorneys. Many attorneys mistakenly believe their personal auto insurance will provide adequate coverage. This may not be true. A personal auto policy may not provide any or all of the coverage necessary if there is a serious accident while an attorney’s personal vehicle is used for business purposes or if a client is injured while in the attorney’s vehicle. If an attorney is using his or her car to travel to clients on a routine basis, then making sure they have a commercial auto policy is essential.

Finally, attorneys evaluating professional liability insurance options should also determine if the policy offers to waive the deductible for early claims resolution. Typically, a claim is considered in early resolution when it is closed within 90 days of reporting. Many professional liability policies do not include this option, and attorneys frequently fail to ask their agents if such an option is available, potentially leaving substantial costs on the table.

There are countless examples of how and where “off the shelf” professional liability insurance policies fall short for attorneys. Working with insurance professionals who have extensive experience with lawyers and law firms is the first in a series of steps attorneys can take to ensure they’ve done their due diligence to mitigate their short- and long-term risks.

When considering purchasing a professional liability policy, attorneys should look for a policy that bundles coverage for issues that include:

Cyber liability

Employment practices liability

Workers’ compensation

General business owner’s liability

Commercial auto

Fidelity bond

Failing to fully explore and understand what is and isn’t included in a professional liability insurance policy opens up tremendous risk to attorneys, both immediately as well as later in their careers. Just as you would advise your clients to carefully read contract terms, I advise you to review your insurance policy against your known risk exposures.

To better understand your risk and how to protect yourself, email me at abiggio@firstindemnity.net for a free consultation.

From time to time, your hard work successfully advocating on behalf of your client will result in some unpaid bills. Especially if the legal matter did not turn out as favorably as your client hoped, you could find yourself in a situation where your client refuses to pay appropriate legal fees for services rendered.

While these situations are usually rare, they are not uncommon.

My advice to attorneys in this situation is to consider the ramifications of pursuing these clients. Most attorneys will notify their clients to let them know they are in breach of their agreement for services rendered if the clients are not paying their bills. It’s the step that comes next – instituting a lawsuit or pursuing fee arbitration or mediation – that has the potential to harm the attorney.

Once a lawsuit (or arbitration or mediation) is instituted over legal fees, most often the client in question will file a counter claim of professional negligence. It’s that counter claim that immediately engages the attorney’s Errors & Omissions policy and its corresponding deductible.

It’s because of the insurance risk that the American Bar Association offers a cautious warning to attorneys who are considering suing their clients over legal fees.

Attorney’s must carefully weigh the value of pursuing these unpaid fees along with the likely corollary rise in their insurance premiums. The typical rate increase on an attorney’s liability insurance coverage can be 10 percent following a claim. As a result, most attorneys can think twice about pursuing legal action on unpaid fees unless those fees are in excess of $25,000.

Further, in addition to the risk of higher insurance premiums, many insurance underwriters will see professional negligence or malpractice insurance claims as red flags on a renewal application. This means the worst-case scenario is not just higher rates—it could be having your coverage dropped entirely.

The good news is for those attorneys who follow the rules and adhere to the highest ethical standards of practicing law, instances of suing clients over legal fees will be rare, if they occur at all. In a typical legal career of 30 or more years, I have only seen about three instances of attorneys needing to turn to the legal system to have their fees paid by reluctant clients. As such, this is not a frequent problem many attorneys face, and it is typically restricted to certain types of legal practices: family law, estates and trusts and divorce law.

Less common is when a client determines to sue his or her lawyer over legal fees. They may feel they were overcharged or promised results that didn’t materialize or, worse, that you failed to act in their best interest and provide an appropriate level of representation.

While such instances are rare, they do happen.

To protect yourself, pay close attention to your billing practices. Most often when such legal disputes arise, the manner and detail of your billing practices can make the difference between a quick win or a costly mistake. These billing practices include:

Over-staffing a legal matter or case

Non-itemized billing

Billing for time spent on fee collection or firm accounting matters

Failing to delegate routine legal work where applicable

Charges for non-legal personnel or clerical services

Rate increases without prior notification to the client

Understanding the insurance implications of suing a client over unpaid fees – or not focusing on your own billing practices to avoid being sued over said fees – can have a major impact on your practice’s bottom line.

One of the most common questions attorneys – and pretty much anyone else purchasing insurance – typically asks is “How much insurance should I have?” or “How much insurance is enough?”

The answer, unfortunately, is different for everyone.

That’s why First Indemnity offers a starting point with some basic parameters. Every attorney will have different needs and different concerns, but what follows is information that gives you somewhere to start.

A Coverage Guide for You

If you’re a solo attorney just getting started and your client volume is low, you’re going to want a professional liability policy that, broadly speaking, offers coverage of at least $250,000 per claim. A $500,00 aggregate limit is fine.

For attorneys with a slightly more mature practice, with say between three and six years of experience and working with five or fewer partners, you’re going to want a policy that provides between $1 and $2 million per claim.

If you’ve been practicing for a decade or more and your firm has 10 or more lawyers, your policy must offer a minimum of $2 million per claim, with a $2 million aggregate.

Once you’re beyond both the above years in practice and 15 attorneys or more, your insurance policy must provide a minimum of $5 million in coverage per claim.

Critical Issues to Consider

With a professional liability insurance policy, whether any legal fees would erode the coverage is the most critical issue to explore as you evaluate just how much coverage is enough. A policy where legal fees erode coverage will provide significantly less coverage than a policy where legal fees do not erode coverage, although premiums for the former may appear more attractive than the latter. In this scenario, you get what you pay for.

Another important issue to keep in mind is cyber liability coverage. Too often, attorneys assume any type of cyber breach is covered under a standard professional liability policy. In most cases, this is not correct. You cannot operate a business today without cyber liability coverage. Because small businesses – and professional services in particular – are increasingly targets of cyber criminals, it’s simply a matter of when, not if, you will need such coverage.

Be sure to get quotes on higher levels of coverage than you think you might need. Keeping the above in mind will help guide you in your initial discussions with insurance professionals about how much coverage you’ll need.

Ultimately, it’s a business decision about how and where to spend money on insurance to mitigate risk to your business. When determining how much coverage is enough, the right answer is usually whatever amount helps you not worry about the consequences of the coverage you select.

The reality is that most attorneys don’t think about the disciplinary process until they are in it, and by then, it’s too late. That’s why you should know the process, understand the risks, and protect yourself now.

Common types of ethics complaints

While intentional malfeasance makes headlines, the majority of ethics complaints against lawyers come from run-of-the-mill problems, according to the ABA Journal. These include:

• Failing to properly communicate with clients, such as not returning phone calls promptly or not sending written termination letters.
• Disputes over fees, often because the attorney’s fee agreement wasn’t disclosed in writing to the client.
• Bouncing a check. The laws regarding IOLTA (Interest on Lawyer Trust Accounts) are complex, and funds are easy to mishandle. If that happens, it triggers an automatic discipline report in some states.
• Conflicts of interest. This can be especially tricky for firms with multiple partners who fail to communicate with one another.

What happens when a complaint is filed

Disciplinary proceedings vary by state. Many process complaints through a State Bar. Others do so through a court of law, while others use statewide grievance committees or offices. And while each state’s processes differ slightly, there are common themes.

Once you receive a notice of complaint, you must respond. If you fail to do so, a disciplinary action could be made against you by default. After you respond, the disciplinary board will proceed as needed. Steps could include continued investigation, the issuing of subpoenas to review case files, and/or depositions. The disciplinary board will then take action, which may include a letter of caution, a private reprimand, or the filing of formal charges of misconduct, the latter of which could lead to censure, suspension or disbarment.

How to protect yourself

If you receive a disciplinary complaint, you will not be able to stay objective. You will need to hire outside counsel to represent you.

Whether you’re a solo practitioner, an associate or a partner in a mid-size or large firm, you should also be proactive. Make sure your firm’s professional liability policy includes disciplinary proceedings coverage. It will provide coverage for any inquiry or proceeding by a regulatory or licensing board, peer review committee, disciplinary official or state/federal agency for any charges alleging misconduct. It will not cover any fines, penalties or sanctions made by a disciplinary board against an attorney.

I advise lawyers to look for disciplinary proceedings coverage with a $50,000 limit. That limit is separate from the existing policy limit. Look for coverage with a broad definition of a proceeding, which means it may pay $50,000 per proceeding and/or up to $100,000 for all proceedings within a calendar year.

No matter how ethical or detailed-oriented you are as an attorney, avoiding any and all disciplinary proceedings can be near impossible. By understanding your state’s disciplinary process and obtaining proper coverage, you will reduce your personal stress and be well prepared to defend your license if needed.

Andrew Biggio is the founder and president of First Indemnity Insurance Group, which provides professional liability insurance for attorneys, tax prep accountants, CPAs and bookkeepers. First Indemnity is headquartered in Lynn, Massachusetts (near Boston), with additional offices in New York, Chicago, Dallas, Los Angeles, Philadelphia and Tampa, Florida.