Like most lawyers, you know that your diligence and professionalism can help to minimize the chance of having a problematic engagement. Yet even with the best laid plans, things can go wrong, and you could find yourself facing a legal malpractice claim.
Claims happen every day, often to the best of lawyers, and sometimes even during an error-free engagement. It’s one reason why lawyers need malpractice insurance. Law firms face considerable risk from a legal malpractice claim, making the right Legal Professional Liability Insurance (also known as malpractice coverage) an essential component of every Colorado firm.
Here is what you should know about why lawyers need malpractice insurance:
Who Is at Risk for a Claim
Many lawyers understand there’s a risk of being sued by a client as a lawyer but don’t think it will ever happen to them. Some wonder if it’s necessary to obtain coverage when first opening a small practice.
Others work in an area where it seems like “everyone knows everyone” and they’re always extremely diligent in their work. Most lawyers believe it is unlikely their clients would ever sue them, but it is important to consider the following:
- It is estimated that 4–17% of lawyers are sued by clients each year.
- There is a 50% chance that you will have a malpractice claim or disciplinary complaint brought against you at some point in your law career.
- Small law firms with fewer than five attorneys account for 70% of all reported malpractice claims.
- An error-free engagement does not protect you from a legal malpractice claim, and claims are commonly brought even when no mistake was made.
All lawyers are at risk for a malpractice claim, including those at small firms who provide error-free engagements, which is why lawyers need malpractice insurance.
How Claims Can Occur
Over the years, we have seen many claims against attorneys. A recent report from CNA shows how a majority of claims are occurring in Colorado:
- Failure to calendar properly – 18%
- Disciplinary action – 28%
- Lack of follow up – 9%
- Improperly drawn or recorded documents – 9%
Many times, these types of errors are correctable, but sometimes an error can cause damage to a client. Even if the client does not seek all your personal assets as compensation for their loss, your professional reputation can still take a hit.
In addition to these common errors, many lawyers are surprised to learn that claims can occur when no mistake was made.
In fact, only 13.24% of all claims resolve with a payment to the plaintiff either by settlement or trial, according to data from the 2012–2015 ABA Profile of Legal Malpractice Claims.
What Benefits Coverage Provides
Malpractice insurance helps protect you from the cost of legal fees, judgements and settlements that can follow a claim, whether you have made a mistake or not.
In today’s world, the costs of defending against even one frivolous claim can be extraordinary. Legal fees alone can add up to well over a lifetime of insurance premiums, as studies show lawyer malpractice claims are becoming more and more expensive to defend.
Malpractice claims also mean stress and time away from your practice.
Legal Professional Liability Insurance pays for an objective defense attorney, professional support and advice to help you through a challenging and stressful situation.
Coverage from the Lockton Affinity and CNA Professional Liability program is affordable and can provide valuable benefits to CBA members, including:
- Broad coverage: CNA provides malpractice protection to lawyers engaged in a wide variety of practice areas, with coverage for costs associated with pre-claim mitigation, defense costs, judgements and settlements.
- Insurance expertise: Our representatives are experienced and knowledgeable about Professional Liability Insurance for CBA members, providing guidance throughout the process and ensuring you receive the coverage you need.
- Extended reporting periods: Coverage provides an automatic extended reporting period, a death and disability extended reporting period and a non-practicing extended reporting period.
- Risk control resources: CNA policyholders get access to an industry-leading risk control program offering in-person risk control seminars, webinars and on-demand programs, plus articles and resources to help you prevent claims.
- Risk management credit: The program offers policyholders up to a 7.5% premium credit for completion of CNA’s risk control programs, which also qualify for continuing legal education credit in Colorado.
- Risk control hotline: CNA malpractice coverage also offers policyholders access to a risk control hotline for guidance on difficult ethics, administrative and law practice management issues, further helping to minimize your risk of a claim.
Malpractice claims are common in the legal profession, even when no error has been made. Many lawyers wonder who to turn to for advice, how to fund a defense and how to indemnify a client in the case of an error that causes a financial loss.
With Professional Liability Insurance from Lockton Affinity and CNA, you have coverage that is specifically designed for Colorado Bar Association members, so that you can pursue your professional practice with coverage that’s right for your firm.
Information provided by Lockton Affinity is not intended as legal advice.