What You Dont Know about Your Insurance Policy Can Hurt You

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.