As an attorney, your clients count on you for trustworthy and professional legal services and advice. Whether you’re a solo practitioner or a large, multinational law firm, you have exposure to a number of liability risks that are unique to the legal profession and arise out of the practice of law. You also face other risks that are common to business owners, such as damage to your property or visitors getting injured while visiting your office.
Law firms of all sizes should consider purchasing Professional Liability Insurance (also called malpractice insurance) in order to protect themselves from professional mistakes or unhappy clients.
For small law firms, a Business Owner’s Policy can provide protection for the firm’s property and liability that doesn’t arise out of the practice of law.
Firms that have employees are required to buy Workers’ Compensation Insurance in many states. If your business owns vehicles, you may need Commercial Auto Insurance. We also describe Data Breach Insurance, which is an optional coverage that protects your firm if sensitive information is lost or stolen. Umbrella insurance can also protect your firm if it faces a large liability claim that exceeds the limit of your primary insurance policies.
Professional Liability Insurance
Professional Liability Insurance for lawyers, also known as malpractice insurance, is one of the most important types of insurance for law firms. As an attorney, you and your firm do your best to provide the highest quality representation to your clients. Sometimes, despite your best efforts, clients are unsatisfied with the work you’ve done.
In a situation where your firm has made mistakes, or even when you are not at fault but a client perceives that you are responsible, professional liability insurance can protect your firm from the financial consequences of lawsuits. This insurance coverage can cover the cost of hiring lawyers to defend against a lawsuit and any settlement or judgment against your firm that arises out of the practice of law.
Malpractice insurance for lawyers may be written as a standard or nonstandard policy. Standard policies cover the majority of law firms. Nonstandard policies cover firms in riskier areas of practice such as patent law or class action law, as well as firms that have substantial claims history. Standard policies have lower premiums than nonstandard policies.
Small Law Firms
Business Owner’s Policy for Small Law Firms
A Business Owner’s Policy is a package insurance policy that combines property and liability coverages for a small law firm or a solo practitioner. Bundling basic coverages together provides simple, comprehensive protection for your law firm and also saves you money on insurance premiums.
The business owner’s policy includes three important coverages for law firms: general liability, commercial property, and business income insurance.
General Liability Insurance provides protection for your law firm if it is sued for causing bodily injury or property damage to someone else. It does not provide any protection for liability that arises out of the practice of law. In addition, general liability insurance provides coverage for specific acts of libel or slander.
Bodily Injury: A client visits your law office and trips over a piece of fraying carpet. The client breaks their arm and requires expensive medical treatment. The client sues your business for medical expenses and lost wages as a result of the fall.
Property Damage: You ask your secretary to drop off legal documents that need to be signed at a client’s home. While in the home, the secretary accidentally knocks over an expensive antique vase and destroys it. Since the secretary is performing work for you when the accident happens, the client sues your firm for the cost of the vase.
Commercial Property Insurance provides protection for the property your business owns. If your firm owns the building that you occupy, commercial property insurance can insure the structure from risks such as fire, windstorm, vandalism, and more. Additionally, commercial property insurance covers business property at your office such as computers, office furniture, and law libraries.
Business Income Insurance provides coverage for lost income if your business is unable to operate due to property damage that occurs from a risk covered by commercial property insurance. If a fire destroys your office and renders you unable to work for several days, business income insurance can help to cover your lost income during this period.
Large Law Firms
Commercial Property Insurance
For large law firms, commercial property insurance can protect the property that your firm owns or leases. This property can include computers and laptops, other electronic equipment, furniture, and office artwork. Additionally, any law libraries or other valuable papers can also be covered under a commercial property policy. Finally, if your law firm owns the building or office condo where you work, commercial property insurance can provide protection for the structure or building from perils such as fire, smoke or water damage caused by sprinklers or broken pipes.
General Liability Insurance
General liability insurance provides protection for your law firm for bodily injury or property damage caused by your law firm. For large firms, this helps protect you if a visitor to your office trips and falls on the icy steps of your building and sustains a serious injury. It can also protect you if a pipe bursts in your office and causes water damage to neighboring offices in the same building.
This coverage does not provide protection for any risk exposure your firm has that arise out of the practice of law, as that exposure is covered by professional liability insurance. However, it does provide broad coverage for a variety of risks that are common to business owners of all kinds.
Other Coverages for Law Firms
Workers’ Compensation Insurance
Workers’ Compensation Insurance provides financial benefits to your employees if they suffer from a work-related injury or illness. In return for agreeing not to sue your business, an injured worker can receive funds for medical expenses and partial lost wages. If an injured employee does sue your business, workers’ compensation insurance can cover the costs to defend the lawsuit.
If your law practice has employees who are not law firm partners, workers’ compensation insurance is required in many states. Employees can be other attorneys, paralegals, legal secretaries, or clerks, among others.
Types of injuries that workers’ compensation insurance for law firms can cover include slip-and-fall injuries, and repetitive stress injuries such as carpal tunnel syndrome. Additionally, if an employee is injured while driving for work purposes not including commuting, workers’ compensation insurance can also provide coverage.
Commercial Auto Insurance
Routine usage of your personal vehicle to commute to and from your office and court will usually be covered under your personal auto insurance coverage. However, if your law firms owns vehicles titled in the name of the firm, you’ll need commercial auto insurance to cover them properly. Also, if your employees or partners drive your personally owned vehicle for business purposes, you’ll also want to have commercial auto insurance to cover your business’ liability.
If your firm’s employees frequently drive their personal vehicles for business purposes, you may want to purchase Hired and Non-Owned Commercial Auto Insurance. This insurance will provide excess coverage in the event that one of your employees causes a crash and the employee’s personal insurance is insufficient to cover the damages. Since the employee was working at the time of the crash, the injured party may sue your business to try to recover damages.
Data Breach Insurance
As attorneys, it is common to handle sensitive data for clients, whether that data is used to build a case, for discovery, or in preparation for a settlement or a trial. In today’s digital and networked world, hackers and thieves are always looking to steal personal information from vulnerable businesses. Although your firm likely takes precautions to protect your data, even large and sophisticated companies experience breaches.
If your firm does experience data loss or theft, data breach insurance can help your firm pay for the direct and indirect costs of handling a data breach. These costs can include notifying your clients and providing credit monitoring services to affected individuals. They can also include costs to hire technical consultants, legal counsel, and public relations professionals to comply with regulations and repair your firm’s reputation.
Umbrella insurance can provide peace of mind for law firms that face potentially large judgments or settlements that exceed the limits of their primary general liability or commercial auto insurance policies. This insurance provides additional coverage beyond the basic coverages in your general and auto liability policies. It does not provide coverage for liability that arises out of the practice of law.
Examples of situations in which umbrella insurance may be useful include severe accidents that cause major injury or leave a highly-paid individual unable to work for a substantial period of time. These accidents could be trip-and-fall accidents, or caused by one of your employees in between two work-related locations. In these severe cases, having umbrella insurance could protect your firm from major financial damages.