Risk is the first consideration for any business owner.\u00a0 Starting a new business is an inherently risky proposition: You may be leaving a salaried position.\u00a0 You may misjudge the market for your services.\u00a0 You may be overcome by the business management responsibilities that threaten to strangle your technical proficiency.<\/p>\n
But, for lawyers, the notion of risk mostly starts and ends with the specter of committing malpractice.\u00a0 With so many rules and laws governing the profession, attorneys are rightly concerned with screwing up \u2014 even if they do so without malice.\u00a0 That\u2019s why lawyers starting new firms are always looking to acquire malpractice insurance, in the first instance.<\/p>\n
Before you rush to get a policy, however, there are some things you should know.<\/p>\n
The When.<\/strong>\u00a0 If you\u2019re a new lawyer and you don\u2019t have any clients, you don\u2019t need malpractice insurance.\u00a0 Who is going to report you, or sue you?\u00a0 So, if you don\u2019t anticipate taking on your first client for 6 months, don\u2019t pay for insurance until you do.\u00a0 The insurance acquisition process is relatively quick, and some providers now offer cloud-based application and renewal options<\/a>. It\u2019s important to note, as well, that professional liability insurance is a \u2018claims-made\u2019 policy.\u00a0 That means that the insurance must be in place when the claim is made by the client, not when the alleged incident of malpractice occurred<\/a>.\u00a0 Practically speaking, then, even if it took you three weeks to get your malpractice insurance squared away, it\u2019s very unlikely that your first client will be making a complaint about you in that window.\u00a0 You could, of course, extend that window, and try to guess at which point your first complaint comes in, to try get away with not paying for malpractice insurance for a little while longer; but, that\u2019s the most dangerous game \u2014 better to get the policy in place right after you sign your first client.\u00a0 If you\u2019re starting up with a historical practice behind you, of if you\u2019re porting over a book of business, you\u2019ll want to understand what \u2018tail\u2019 coverage options<\/a> you have, in case claims arise out of your prior practice.\u00a0 But, know that, in some states, like Massachusetts, malpractice insurance is not required: you\u2019ll just have to report whether or not you have it.\u00a0 Of course, you\u2019d be crazy not to get it, even when you don\u2019t, technically, have to.<\/p>\n The Where.<\/strong>\u00a0 There are a number of sources for acquiring professional liability insurance for lawyers.\u00a0 Many attorneys will turn, in the first instance, to bar associations, some of which have full-scale insurance agencies, but most of which maintain partnerships with insurance companies.\u00a0 Just be careful here, because in many cases, that partnership means that the bar association provider will not be able to shop rates: they\u2019re locked into working with their partner.\u00a0 Similarly, you can buy malpractice insurance directly from large, name carriers, like Liberty Mutual or Travelers.\u00a0 If you use a private insurance agency, you will have in your corner an agent, who can shop you around for the best rate.\u00a0 But, regardless of whether you use an agent or not, you should compare several options before deciding on a policy.\u00a0 Policy limits will be defined, mainly, by your risk profile and tolerance; but, keep in mind that, in some cases, especially if you\u2019re being referred cases by branded networks, lawyer referral services or agencies (like title insurance companies), you may be required to maintain certain policy limits by those organizations.\u00a0 Finally, since professional liability insurance is just another type of insurance, like your home, auto or life insurance, bundling<\/a> it with other insurances may save you some money.<\/p>\n Claims Made.<\/strong> Not all malpractice insurance policies are created equal.\u00a0 Your rate will depend on several factors.\u00a0 If you are starting a law firm right out of law school, your rates will be lower, in part because, statistically, new lawyers are a low risk for malpractice claims (they\u2019re still being careful)<\/a>, and in part because new lawyers have a \u2018short tail\u2019 or no tail at all \u2014 there are no past clients who can make a claim at the time the policy is signed.\u00a0 Rates rise as the tail grows \u2014 as the list of past clients increases.\u00a0 Your rates will also depend on your practice area.\u00a0 Statistically, some practice areas (like family law) have higher incidences of claims than others<\/a>.\u00a0 And, if you decide to practice in those areas, you\u2019ll pay for the privilege.\u00a0 In certain cases, including patent law or intellectual property law, it may be difficult to find coverage at all, if you\u2019re opening a solo or small firm law office.<\/p>\n Ride-Along.<\/strong>\u00a0 Your rate will also be affected by the policy riders that you choose.\u00a0 There are a number of different \u2018riders\u2019 that could attach to your basic malpractice insurance policy; these are additional coverages (like \u2018full collision\u2019 or rental car coverage on your auto insurance) that will push your rate upward.\u00a0 Umbrella coverage<\/a> of some kind is not uncommon.\u00a0 Cyberinsurance<\/a>, to protect against data breach, is increasing in popularity, for obvious reasons.<\/p>\n Once you have your malpractice insurance in place, you can practice with increased confidence; and, if you choose wisely, you can save money, while simultaneously covering as much of your risk profile as possible.<\/p>\n . . .<\/p>\n If you want to start your own law firm, join me for an exclusive workshop, coming up in Boston (August 24-26) and New York (September 7-9).<\/p>\n For more information, visit the official site: www.buildyourownlawfirm.com<\/a>.<\/p>\n Social media hashtag: #BYOLF<\/a>.<\/p>\n Visit our Sponsors:<\/p>\n