Lawyers Professional Liability (LPL) or Legal Malpractice coverage is an essential part of a law practice’s risk management and insurance program. The coverage provides attorneys with liability coverage for financial loss suffered by third parties arising from acts, errors, and omissions in providing professional legal services. The cost of an LPL policy depends on several factors, including size, practice areas, geographical reach, and claims experience, which is why it’s so important that the application/submission accurately reflects the insured’s practice.
One of the variables in determining the cost of an LPL policy is the number of full-time attorneys at the law firm. Some carriers will distinguish among “of counsel,” contract attorneys and retired (or reduced schedule) attorneys. Other insurers will price a policy differently depending on how many partners or associates the firm employs. This is important, because the risks associated with a retired or part-time partner and that of an “of counsel” or a non-practicing contract attorney are typically different from the risks associated with a full-time, practicing attorney. In addition, you also want to make sure that retired partners are covered for potential claims that may arise after they are no longer working. A non-practicing extended reporting form for attorneys who have retired or have ceased practicing law should be included in the policy.
Another factor that goes into determining the LPL rate is the frequency and severity of practice areas. Residential real estate, plaintiffs’ personal injury and family law typically have a higher frequency of claims. Other practice areas, such as intellectual property, securities and environmental law, generally have a higher severity of claims. A law practice may want to consider whether it’s worth continuing in engaging in a non-core practice area that falls within a high-risk category. Of course, it’s important to indicate the law firm’s areas of practice so that the coverage will respond in the event of a loss.
On the flip side, if a law firm has strong risk management in place, it may be eligible for premium credits if the insurer offers this. A law firm, for example, that can show dedicated use of risk management tools, such as docket control, conflict resolution procedures, or formalized billing practices, may be eligible for a discounted rate.
In addition to ensuring that an insured understands how LPL policy premiums are determined, it’s also important to review in detail how the coverage is applied. Review with the insured attorney the definition of what constitutes a claim and the conditions of filing a claim. Most Professional Liability policies are written on a claims-made basis. In order to establish coverage on a claims-made policy, the policy must be in place at the time the claim is made. Additionally, the insured’s “retroactive date” or “prior acts date” must be dated at least as far back as when the services giving rise to the claim were provided. The insured attorney’s “prior acts” or “retroactive” date is established at the time the policy is created and always is clearly defined in the declarations page of the Professional Liability policy. Finally, notifying the insurer of a claim must be provided in a timely way, according to the claim-reporting requirements defined in the LPL policy.
Other important considerations in an LPL policy are discussed in a previous article. RPS specializes in Professional Liability insurance, including for law practices, and can assist you in placing coverage that fits your client’s risk profile.