Do Lawyers Have to Have Malpractice Insurance?


Hiring a lawyer can be expensive, but it’s essential when facing a difficult legal issue. Lawyers are paid so much because complicated legal issues require expert knowledge and time. Do lawyers need malpractice insurance? The clients want to know the investment is covered in case the lawyer commits a mistake, and it’s possible the lawyer is not covered by malpractice insurance.

Definition of Malpractice and Malpractice Insurance

It is essentially a mistake committed by a professional such as a lawyer. Everyone makes mistakes. Even lawyers. Lawyers may be negligent due to various reasons.

Additionally, financial mishaps are the most frequent malpractice claims. Lawyers are required to manage client funds professionally. Retainer fees should be kept in a trust account that is specifically designated. The excess retainer fees have to be reimbursed. Failure to care for these two things could lead to a malpractice lawsuit.

Which States Require Lawyers to Have Malpractice Insurance?

A few states require that lawyers carry malpractice insurance. Idaho and Oregon require substantial coverage. New Jersey requires limited liability law firms to carry an insurance policy for malpractice for every attorney.

Rhode Island has requirements if the law firm is a restricted liability corporation or a restricted liability partnership. Texas will require lawyers to carry an insurance policy for malpractice when they operate as an LLC. Additionally, West Virginia requires coverage for law firms that operate as professional limited liability corporations.

Cost of Malpractice Insurance

The cost of malpractice insurance for lawyers ranges between $500 and $9,000. Numerous factors influence how much the expense of malpractice insurance.

Another aspect that affects the cost of malpractice insurance is if the lawyer has been involved in malpractice lawsuits against them. If they’ve been accused of malpractice, insurance for them is riskier. This means that the policy is more expensive for lawyers accused of malpractice. Other considerations include where the lawyer practices and how many lawyers are within the firm if the policy is company-wide.

What is Included in a Malpractice Insurance Policy?

Most brokers offer options of what is included in the insurance policy. On the lower end of the spectrum is a policy that only will cover omissions and errors for lawyers and law firms. It covers certain expenses, like legal defense costs in case of malpractice, however, not other costs such as defense costs in hearings before the state bar association.

What are Malpractice Insurance Ratings?

A D rating is given to insurance companies who might be unable to give the insurance coverage they claim to offer. If there is an action for malpractice against the lawyer and the insurance company cannot cover it. This can be detrimental to both the lawyer as well as the client.

Claim against Lawyers for malpractice

Usually, malpractice claims must be made when policy remains in place. If the lawyer has paid for an annual policy and is required to inform their insurance company regarding the malpractice claim within the duration of the insurance policy. Sometimes, there’s an unspecified grace period following the policy expires, during which the lawyer can not notify the insurer of the malpractice claim.

Final Thoughts – Do Lawyers Have to Have Malpractice Insurance?

Lawyers do not all are covered by malpractice insurance. It’s not even mandatory in all states. The states that require it do so only for it specific types of legal firms. The cost of malpractice insurance can vary greatly. However it generally is higher for lawyers who require it the most.

Brian Santiago

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