What professional liability limits should a firm carry is a frequently asked question. It is one of the hardest questions for an insurance agent/broker to answer for a law firm. The broker simply does not know your law practice well enough to give more than a ballpark of needed limits. Although there are general guidelines, there is no set answer for a law firm. Best answer is given the type of practice a law firm has and the type of clientele, if I make a mistake how much could it cost?
Even the type of practice criminal versus plaintiff work, is not enough to answer the question. Some criminal law attorneys handle some very high profile clients. If allegations of an inadequate defense are made how much could that cost? Reality is a wealthy criminal law client could have the resources to pursue you for many years versus an indigent client. Or if all you handle are drunken driving cases, what could he damages be.
Estate work can vary widely again by the size and types of estates a firm handles as to the limits needed. Again this holds true for almost all areas of law. It is not the average value of the cases the firm handles, it is the size of the largest or potentially largest cases that the firm handles that need to be considered.
Your Lawyers Professional Liability Insurance application asked a number or risk assessment question, making it an excellent source to help evaluate limits needed. Some states have minimum mandates based on the size of the firm or some other criteria. Some clients and services require certain minimum limits.
Once you settled on a per claim limit, next step is to determine the likelihood of multiple claims in one policy year. The aggregate policy limit is also very important. The collections, area of practice is one area that you could end up with many claims in one year over one procedural error.
Generally policy limits are very difficult to increase during the policy year, unless there are circumstances such as a client is requiring higher limits. Once there is a claim made against the firm, is too late to be looking to increase the limits to cover that loss and it may be difficult to increase your limits in the future.
An underinsured attorney will find that their carrier pays out up to the policy limits on a claim that exceeds the value of the policy. Once the insurance carrier has paid out its policy limits the attorney is on their own for defense and indemnity costs. Being underinsured could be a very expensive proposition.
Remember Lawyers Professional Liability Insurance is “Sleep Insurance”. Question that needs to be asked is given the policy limits that you have chosen, how well will you “Sleep” at night.