Need for legal malpractice insurance today
There are about a million lawyers in USA. The lawyers in USA are on growth. Many number of law graduates passes out every year and joins a law firms. The client case always cannot be won. There will be verdicts in favor or against a client. Negligence on the part of the lawyer will also contribute towards the losing of case.
A legal malpractice case is set back towards the growth of the law firms if there is no effective legal malpractice insurance for the firm.
Legal malpractice is defined as any negligent or wrongful act committed by an attorney that causes damages to his or her client.
There are many types of insurance available today. Legal malpractice insurance which comes under the professional liability insurance refers to an insurance provided by the third party towards the claim of a client against an attorney. If the clients sues an attorney for legal malpractice, although attorney is liable for the amount claimed the Legal Malpractice Company/ firm pays the amount. Hence there would be no burden on the lawyer paying the huge amount.
According to the statistics, every 5 out of 100 attorneys in USA are facing legal malpractice cases. More than 35,000 cases are filed annually on the alleged legal malpractice of attorneys. 25% of the legal malpractice cases are related to personal injury, 23% are related to real estate, 11% is related to Bankruptcy and collections and the 8 % is related to family law. As a general rule, legal professionals are not required to obtain legal malpractice insurance. Only 60% of attorneys in USA have legal malpractice insurance
Legal malpractice insurance available to lawyers and law firms may be classified into many such as: Individual, Small, Medium, large Law Firms and medical malpractice insurance for employed lawyers.
Individual lawyers availing legal malpractice insurance is lesser today. And the legal malpractice insurance offered to small law firms are lesser.
Working in a legal department of a non- legal corporation does not make the lawyer immune from claim, legal malpractice case on the lawyers employed in corporations also increasing.It is also mandatory under certain law to disclose about the professional liability insurance with the client. E. G. In California, Rule 3-410 of the Rules of professional Conduct which is effective from January 1, 2010, It is mandatory on the part of an attorney to inform about the professional liability insurance in writing to the client at the time of clients engagement. Most state or county bar association lawyer referral programs require their member attorneys to be insured
In many states, counties and cities, bar association “endorsed” insurance programs are aggressively marketed.
While defending legal malpractice claims, attorneys not only lose money but also valuable time. The average figure may vary from 250 to 300 hours per case that can be billed. This insurance protects a lawyer for each lawsuit he has to face.
Thus, attorney malpractice insurance becomes necessary. In many of the legal malpractice claims, insurance company negotiates with the victims and offers the compensation. In most of cases, insurance company designates a law firm for the representation of the defendant.
Since the legal malpractice cases are on growth, there are many law firms in USA exclusively offering their service on Legal malpractice cases.The cost of a policy is directly influenced by the degree of risk involved in the profession. For example, if a lawyer/ law firms are into banking or real estate, the cost may be quite higher than a regular cost of a policy.
Most professional liability policies are written on a “claims-made” (i.e. coverage will apply to a claim made against the insured within the coverage period provided by the policy regardless of when the injury occurred) basis, though sometimes coverage is available on an “occurrence” basis.
There are also coverage like Tail Coverage which is runs for a specific number of years that coverage will exist when a law firm cancels its insurance policy or dissolves. Coverage also will continue for a lawyer who retires or leaves private practice to become a teacher or assume a judgeship
There are also Specific Coverage a specific area of law that is high risk, such as securities, banking, personal injury and real estate, may have higher insurance premiums and coverage limitations that may apply. Some policies may not cover some forms of legal malpractice such as fraud theft or willful injury.
Deductibles: A deductible applies to a professional liability policy just like any other type of insurance policy that is issued. A deductible typically applies to loss and defense costs. A higher deductible may be required by an insurer for high risk individuals. A high deductible also can be used by the insured to lower the cost of the policy. Deductibles can apply per policy claim or paid on an annual basis.
Coverage Agreement and Exclusions: Individuals who purchase a professional liability insurance policy should always read the coverage agreement and review the policy’s exclusions. The coverage agreement provides details about the coverage and any additional people covered by the policy. The exclusions on a policy are acts by the insured that are not covered by the policy or are covered by another type or kind of insurance.
Even more important is the question of whether claims expenses are including within the limits of liability or whether they are payable in addition to the limits of liability. Even when claims expenses are payable outside the limits of liability, some carriers provide a specific, separate limit for defense (usually equal to the limit for damages), while some carriers are silent on the issue, which – theoretically, at least – means that claims expenses are unlimited.
There is also an issue about coverage of lateral hires. Many insurance carriers will customarily cover the attorney from the date of hire, on the assumption that the former firm’s policy will respond to claims arising from the time that the attorney was employed by or a member of that firm. It is really difficult to find out whether particular attorney or law firm carries Legal malpractice insurance as the many state law does not make it mandatory to disclose it to the client. However, it is good on the part of the client to get such information from an attorney.
In many countries insurance companies offer professional liability insurance to doctors, engineers, lawyers, web developers, accountants, architects, real estate brokers, appraisers, and website developers . In India, although we see few companies offering medical malpractice insurance to doctors, there are no law concerning filing of a legal malpractice case against the lawyers and there is no legal malpractice insurance available to lawyers. In India, if lawyers commit a breach of his fiduciary duty, there is state bar council to take action against the Lawyers including suspension and removal from the name of the lawyer from state bar council.