Various bases for malpractice actions against attorneys are
available including: (1) negligence or legal malpractice, (2) breach of
fiduciary duty, (3) violations of state or federal statutes, (4) common
law fraud, or (5) breach of contract. Both suits by clients and suits by
non-clients may be permissible.
Lawyers' Malpractice Insurance
policies (also known as lawyers' professional liability policies) are
not all created equal. There is no standard policy form for legal
malpractice insurance. Therefore, important policy provisions can vary
substantially from one insurance company to another. When comparing the
policies offered by different insurers, you should pay special attention
to the following policy provisions:
• Electronic Media Coverage
Most
law firms use electronic media to conduct business. This coverage can
respond for misdirection of email or other media such as intranet,
extranet or internet connection, or loss of client information
transmitted via electronic media, or unintentional spread of a computer
virus into or enabling a denial of service attack on a third party
computer or network, or unintentional unauthorized access, or personal
injury arising from the use of electronic media such as a web site or
social media.
• First Party Cyber Liability Coverage
Some
insurers will reimburse the insured for up to $25,000 for the cost of
hiring a third party to mitigate the potential of legal liability claims
arising from any security breach that results in the loss or theft of
confidential client information.
• Deceptive Trade Practices Acts (DTPA) Coverage
In
some jurisdictions DTPA coverage is important. Lawyers may still be
liable for certain actions under DTPA type statutes. Misrepresentations
by an attorney are still actionable under some DTPA statutes. Note some
legal malpractice policies do not cover all DTPA damages such as the
multiplied portion of treble damages.
• Punitive and Exemplary Damages Coverage
Many
legal malpractice policies specifically exclude punitive and exemplary
damages. It would be preferable to have a policy that would provide
coverage where permitted by law.
• Innocent Partner Protection
Criminal,
dishonest or fraudulent acts by a lawyer are excluded from coverage by
all policies. Via an exception to the exclusion any other innocent
lawyer insured under the policy that neither participated nor acquiesced
in such acts may benefit from coverage.
• Deductibles - Per Claim v. Aggregate and First Dollar Defense or Loss Only
With
a "per claim" deductible, each claim against you during a policy year
subjects you to a new deductible. Some policies have "aggregate"
deductibles so an insured would not be charged more than one deductible
per policy year. Another feature available is first dollar defense
within the deductible.
• Alternative Dispute Resolution (ADR)
Some
insurers will waive a percent of the deductible (e.g., 50%) or may even
waive the entire deductible if ADR is used to settle a claim.
• Hammer Clause
A
"hammer clause" provides if the insurance company wants to settle a
claim but the insured does not consent to the settlement, then the
policy will only pay the amount for which the insurance company could
have settled the claim. In effect, coverage for the claim is reduced to
the settlement demand. It would be preferable to have more favorable
consent to settle provision.
• Loss of Earnings
Time
spent defending a malpractice claim means a loss of revenue to you.
Some legal malpractice policies may provide you with expense
reimbursement/trial attendance coverage in the $500-$750 range for each
day you are out of the office for trial, mediation, arbitration or your
own deposition in defending a claim under the policy.
• Disciplinary Proceedings
Some
legal malpractice policies will allow coverage for up to $25,000 or
$50,000 for defense costs incurred to respond to disciplinary
proceedings. This may be an additional limit and not subject to the
deductible.
• Other Coverage Options
Some other coverage options available may include:
1. Predecessor firm coverage
2. Career coverage
3. Lateral hire coverage
4. Extended reporting periods (ERPs) for non-practicing, retirement or disability
Since
legal malpractice insurance policies are not the same, it is important
to have a knowledgeable, independent insurance agent to help you obtain
competitive quotes. Broadness of coverage, premium cost, financial
solvency and service levels should be the main criteria for your
decision making.
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