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What Is Legal Malpractice Insurance?

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What Is Legal Malpractice Insurance?

The sad reality is that most lawyers will be sued in relation to the delivery of professional services at some point in their careers. The American Bar Association has reported that four out of five lawyers will be sued at some point during their career for legal malpractice. Without legal malpractice insurance, entire law practices may be in jeopardy. Here is what you need to know about legal malpractice insurance and how it can protect you.

Who Is Legal Malpractice Insurance For?

Legal malpractice insurance or professional liability insurance covers lawyers who are alleged to have failed to perform their duties in accordance with prevailing professional standards. Lawyers are human and prone to make mistakes. However, when lawyers miss deadlines, fail to raise particular arguments or defenses, do not file proper motions, represent clients where there is a conflict of interest, or make other mistakes, the consequences can be grave. Disgruntled clients may choose to sue the attorney.

Legal malpractice insurance is for all attorneys. Depending on the policy language, legal malpractice insurance may provide coverage for:

  • Law firms and legal networks
  • Full-time lawyers
  • Part-time lawyers
  • Lawyers “of counsel”
  • In-house counsel
  • Contract lawyers
  • Mediators
  • Arbitrators
  • Lawyers completing pro bono work for their law firm

Why Do You Need Legal Malpractice Insurance?

If a dissatisfied client sues their lawyer, their lawyer can be required to pay the client all of the potential funds they would have received had the lawyer handled the case properly. Attorneys cannot protect themselves against personal liability like other types of professionals or business entities. They also cannot preemptively ask clients to waive their right to sue them if their case does not work the way they want it to. Therefore, a successful lawsuit against a lawyer can lead to a sizeable judgment against the lawyer. In some cases, these types of claims can bankrupt the firm.

What Does Legal Malpractice Insurance Cover?

The actual coverage of legal malpractice insurance depends on the policy language. Generally, legal malpractice insurance covers the following, up to policy limits:

Costs to Defend Against Claims

Legal malpractice insurance generally covers the costs of legal defense. For example, it covers the costs to hire a lawyer to defend you. It also covers expenses related to litigation, such as discovery costs.

Damages

Legal malpractice insurance also covers damages arising out of legal malpractice. It covers the firm and its individual lawyers from errors and omissions that occur while providing professional services. Damages may include the amount of money a client could have received had the mistake not occurred. For example, if a slip and fall client suffered $100,000 in damages but the lawyer failed to file a lawsuit within the statute of limitations, the policy might cover $100,000 for the damages. The policy may cover the costs of awards and settlements given to the plaintiff, up to policy limits.

What Legal Malpractice Insurance Does Not Cover

It is also important for attorneys to know what legal malpractice insurance does not cover. General exclusions and non-coverage may apply to:

  • Criminal conduct – Legal malpractice insurance typically covers errors and omissions, not intentional criminal or fraudulent conduct.
  • Employment-related matters – This type of insurance does not typically cover employment-related matters, such as claims for harassment, discrimination, or wrongful termination. However, there are other types of insurance that can cover such claims.
  • Breach of fiduciary duty – Breaches of fiduciary duty are also usually excluded from legal malpractice insurance.
  • Non-legal capacities – Legal malpractice insurance is typically limited to coverage for claims arising out of the delivery of legal services. It does not typically extend to other capacities attorneys might have, such as board members, business partners, or brokers.
  • Claims against other lawyers – Because the entire firm is insured, claims from one lawyer against another lawyer in the firm are often excluded under an insured vs. insured exclusion.
  • Bodily injury or property damage claims – Legal malpractice insurance also does not usually cover claims for bodily injury or property damage claims. 

Additionally, the policy may require the firm to disclose any potential claims against it at the time the policy was underwritten. If the firm fails to disclose it, the policy may exclude the claim from coverage. It is important to carefully review the policy to learn what types of claims may be excluded.

Reach Out for Help from a Legal Malpractice Claim Attornery

The best way to defend against legal malpractice claims is to have a strong malpractice insurance plan in place before a claim ever arises. If you are facing a claim for legal malpractice, reach out to an experienced legal malpractice attorney. Call our firm at (415) 982-4000 or contact us online to learn more.

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