“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.