Lawyers' Malpractice Insurance policies (also known as lawyers' professional liability policies) are not all created equal. There is no standard policy form for legal malpractice insurance. Therefore, important policy provisions can vary substantially from one insurance company to another. When comparing the policies offered by different insurers, you should pay special attention to the following policy provisions:
Electronic Media Coverage
Most law firms use electronic media to conduct business. This coverage can respond for misdirection of email or other media such as intranet, extranet or internet connection, or loss of client information transmitted via electronic media, or unintentional spread of a computer virus into or enabling a denial of service attack on a third party computer or network, or unintentional unauthorized access, or personal injury arising from the use of electronic media such as a web site or social media.
First Party Cyber Liability Coverage
Some insurers will reimburse the insured for up to $25,000 for the cost of hiring a third party to mitigate the potential of legal liability claims arising from any security breach that results in the loss or theft of confidential client information.
Deceptive Trade Practices Acts (DTPA) Coverage
In some jurisdictions DTPA coverage is important. Lawyers may still be liable for certain actions under DTPA type statutes. Misrepresentations by an attorney are still actionable under some DTPA statutes. Note some legal malpractice policies do not cover all DTPA damages such as the multiplied portion of treble damages.
Punitive and Exemplary Damages Coverage
Many legal malpractice policies specifically exclude punitive and exemplary damages. It would be preferable to have a policy that would provide coverage where permitted by law.
Innocent Partner Protection
Criminal, dishonest or fraudulent acts by a lawyer are excluded from coverage by all policies. Via an exception to the exclusion any other innocent lawyer insured under the policy that neither participated nor acquiesced in such acts may benefit from coverage.
Deductibles - Per Claim v. Aggregate and First Dollar Defense or Loss Only
With a "per claim" deductible, each claim against you during a policy year subjects you to a new deductible. Some policies have "aggregate" deductibles so an insured would not be charged more than one deductible per policy year. Another feature available is first dollar defense within the deductible.
Alternative Dispute Resolution (ADR)
Some insurers will waive a percent of the deductible (e.g., 50%) or may even waive the entire deductible if ADR is used to settle a claim.
Hammer Clause
A "hammer clause" provides if the insurance company wants to settle a claim but the insured does not consent to the settlement, then the policy will only pay the amount for which the insurance company could have settled the claim. In effect, coverage for the claim is reduced to the settlement demand. It would be preferable to have more favorable consent to settle provision.
Loss of Earnings
Time spent defending a malpractice claim means a loss of revenue to you. Some legal malpractice policies may provide you with expense reimbursement/trial attendance coverage in the $500-$750 range for each day you are out of the office for trial, mediation, arbitration or your own deposition in defending a claim under the policy.
Disciplinary Proceedings
Some legal malpractice policies will allow coverage for up to $25,000 or $50,000 for defense costs incurred to respond to disciplinary proceedings. This may be an additional limit and not subject to the deductible.
Other Coverage Options
Some other coverage options available may include:
1. Predecessor firm coverage
2. Career coverage
3. Lateral hire coverage
4. Extended reporting periods (ERPs) for non-practicing, retirement or disability
Since legal malpractice insurance policies are not the same, it is important to have a knowledgeable, independent insurance agent to help you obtain competitive quotes. Broadness of coverage, premium cost, financial solvency and service levels should be the main criteria for your decision making.
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