“Bare” Lawyers. A Risk To All In The Profession.
Many attorneys today continue to be “bare” and practice without lawyers’ professional liability (LPL) insurance. Even if you have malpractice insurance you should be aware of the exposure. You do not want to be drawn into a claim against an attorney that you office share with, or you refer a case to because that other attorney does not have insurance.
Despite high claim frequency and the relative affordability of LPL insurance, many lawyers are uninsured. There are no national statistics for the percentage of uninsured private practitioners, but the piecemeal data available suggests that it is significant. For example, a 2001 California state bar survey found that 18% of private practitioners were uninsured, and a 2005 Texas survey found that 36% of private practitioners and 63% of solo practitioners were uninsured. Oregon is the only state that requires its attorneys to have malpractice insurance. (As reported in the AON Attorney Advantage Risk Management Newsletter.)
A 2017 survey of nine leading LPL insurers reported that while new malpractice claims against law firms stabilized in 2016, the number was still above pre-2007 to 2009 recession levels. A malpractice claim, groundless or not, can cost tens of thousands of dollars or more in defense costs, exposing a lawyer or small firm to financial strain. Having adequate LPL coverage reduces the time and money attorneys must expend to defend these claims, which provides peace of mind and allows them to continue with the practice of law for other clients. In addition to traditional malpractice defense and indemnity coverage, many LPL policies available today also provide supplemental coverage for subpoena assistance, disciplinary proceedings and cyber/privacy breach matters.
Although malpractice claims are common in all firms, the risk is increased for attorneys in smaller firms, who are more inclined to handle matters outside their areas of expertise. Thus, LPL insurance is a critical purchase for firms that employ fewer than 20 attorneys and solo practitioners, which account for approximately 75% of the lawyers in private practice. Fortunately, in today’s market, small firms can secure LPL coverage for relatively low premiums. For example, experienced attorneys in Missouri, Kansas and Southern Illinois can generally purchase basic LPL coverage for approximately $2,000 or less annually. Pricing, of course, varies based on your practice, policy limits and claim history.
One malpractice claim can leave your firm at risk for significant defense costs. In addition, a malpractice insurance policy provides indemnity to settle a judgment against an attorney and to provide a recovery to your client who may be financially damaged as a result of your error.
The possibility of a malpractice claim is a fact of life for attorneys. Despite diligence and caution, all attorneys are capable of mistakes that can result in a grievance or a malpractice suit. Malpractice insurance remains a best practice as it provides attorneys with an affordable and effective way to protect their business and clients against an error.
Is Your Firm Considering An “Of Counsel” Relationship?
According to Wikipedia an “Of Counsel” in the legal profession of the United States is the title of an attorney who has a relationship with a law firm or an organization, but is not an associate or a partner. Some firms use titles such as “counsel”, “special counsel”, and “senior counsel” for the same concept. According to the American Bar Association Formal Opinion 90-357, the term “of counsel” is to describe a “close, personal, continuous, and regular relationship” between the firm and counsel lawyer. In large law firms, the title generally denotes a lawyer with the experience of a partner, but who does not carry the same workload or business development responsibility.
The general rule is the “of counsel” lawyer is responsible for his own malpractice, but is not vicariously liable for the “firm’s malpractice”. As a result the “of counsel” needs his or her own insurance policy to cover his or her independent acts. The firm is liable for its malpractice and the firm’s partners are vicariously liable for the malpractice of an “of counsel” lawyer acting within the actual or apparent scope of the firm’s practice and for the firm. As a result the “of counsel” should be added to the firm’s malpractice insurance policy, but only for the acts that the “of counsel” performs for “the firm”.
A firm considering forming an “of counsel” relationship with another lawyer should:
- Use a written “of counsel” agreement which outlines duties, benefits, compensation, use of the office and use of the office letterhead.
- Review your malpractice insurance. Make sure the “of counsel” lawyer is added to the law firm’s malpractice policy to cover acts performed for the firm. The “of counsel” lawyer should be required to maintain his or her own malpractice policy, for the acts performed on behalf of the “of counsel” attorneys own separate practice.
- Monitor the relationship to make sure both the “of counsel” lawyer and the firm are implementing the agreement. To avoid a malpractice “surprise” the review should focus on preventing acts that may indicate that the “of counsel” lawyer is acting within the actual or apparent scope of the firm’s practice beyond what has been agreed to by the parties.
Law firms are under Cyber siege. The headlines focus on the large law firms. However, small and midsize law firms are also susceptible to damages from cyber attacks.
Kaestner & Berry is proud to work with SafeLaw. SafeLaw offers standalone cyber risk protection created for the unique cyber risks of law firms. The SafeLaw policy was designed to fill gaps in Lawyers Professional Liability and protect law firms from first and third party cyber risk losses including:
- Confidentiality and Privacy Breach Liability: This is protection from third parties for the firm’s failure to prevent disclosure of personally identifiable information, information subject to attorney client privilege, data subject to a non-disclosure agreement and other confidential information.
- Regulatory Proceedings, Fines and Penalties Liability: Third-party legal liability protection for regulatory, administrative, or disciplinary proceedings as well as resulting fines and penalties due to a data breach or the firm’s failure to comply with privacy, identity theft, data security or data breach notification laws. Coverage also extends to violations of PCI standards.
- Network Security Liability: Third-party legal liability protection for the firm’s actual or alleged failure to prevent the transmission of hacker attacks, or denial of service attacks.
- Multimedia Liability: Third-party legal liability protection for copyright infringement, trademark infringement, and defamation arising out of the firm’s electronic publishing.
- Data Breach Response Expense: First-party coverage for the firm’s expenses following a data breach including access to a panel of data breach response experts such as I.T forensics, legal advisors, public relations, victim notification, call center support, credit monitoring and identity theft remediation.
- Electronic Data Restoration Expense: First-party coverage for the firm’s expenses to recreate or restore data, software, or firmware that is corrupted or damaged by a hacker attack, virus, denial of service attack, or administrative errors.
- Business Income Loss: First-party coverage for the firm’s loss of income and extra expenses due to computer system disruption caused by a hacker attack, virus, denial of service attack, or administrative errors.
- Cyber Crimes: First-party coverage for theft of the firm’s money, securities or other property due to fraudulent funds transfers or fraudulent use of the firm’s computer system to steal money, securities or other property.
- Cyber Extortion: First-party coverage for the firm’s expenses to mitigate or terminate cyber extortion or ransomware threats.
If you do not have a standalone SafeLaw policy you will find that your business is Not protected for one or more of these risks. Contact Kaestner & Berry for a SafeLaw Cyber quote.
When To Report A Claim
All Lawyer Professional Liability (LPL) policies are on a “Claims Made Basis”. To be more specific, this means the coverage is typically triggered when the claim is made against the insured and reported to the appropriate carrier.
Insurance underwriters are obviously interested in not providing coverage to an attorney who buys coverage after he or she is already aware of a claim or a potential claim. The carriers address this risk in two ways.
The application always asks an attorney if he or she is aware of a claim or potential claim that has not yet been reported. Under Missouri law, if this is presented as a “representation” in the application, the insurance company must proof the misrepresentation was false and material.
A “Claims Made” policy also provides there is no coverage for claims known but not reported during the policy period. This is set forth in the coverage section of the policy. As a result the insurance company does not have to demonstrate “prejudice” with this coverage defense. See Continental Casualty v. Maxwell 999 S.W.2d 882 (MO app 1990).
The bottom line is that the failure to report a claim or a matter that may give rise to a claim during the policy period that the attorney becomes aware of the matter, will jeopardize the coverage.
Contact Kaestner & Berry if you have any questions.
Balance This Thanksgiving
November is the month to give Thanks. I am truly grateful for our modern technology. Like you, my cell phone and computer make my life so much easier. However, there is a need for balance. I recently read that:
- “On average we spend 11+ hours a day digitally connected.
- On average, we check our phones more than 150 times a day.
- 88% of us use a second screen while watching TV.
- 61% of us feel jealous, depressed or annoyed after checking social media updates.
- 60% of us spend more time on computers than with our significant other…and that is just when we are home at the same time!
- There is still a significant amount of texting while driving.”
During this holiday period, spend some time disconnected from your technology and “connect” to your family, friends and colleagues. Give thanks for these personal “connections”. It is these connections that make our life worth living. In the words of Maya Angelou, “Be present in all things and thankful for all things.”
Happy Thanksgiving from Kaestner & Berry.