As an attorney, the last thing you want is to spend thousands of dollars defending yourself against a malpractice suit. With professional liability insurance, you don’t have to. It is a financial buffer between a professional liability claim and your law firm, easing your stress and protecting your business.
Two interesting legal malpractice phenomena
Historical evidence points to an increase in malpractice claims against attorneys during economic downturns. This escalation can be attributed to several factors : assets losing value, deals losing traction and the tendency among attorneys to start practicing outside their core competencies.
Professional liability risk is higher for business transactions practice versus other practice areas. The most common claim in this regard involves improper document preparation, filing and transmittal.
If you practice law, you need professional liability insurance
The risk of being sued for legal malpractice is real for any New Jersey solo practitioner or law firm specializing in any area. Claims can be simple or creative, but regardless of their nature, you must deal with accusations without losing your cool. Here’s a look at the two most commonly alleged malpractice errors.
Conflict of interest, which occurs when your duties and loyalties to the client are divided so as to protect the interests of a third party, another client, or your own interests. Such claims can impact your image and lose the goodwill of clients that you’ve worked so hard to earn.
Failure to follow-up/calendar is another frequent claim when you, for some reason, fail to react to notations in the calendar system or initiate some action but don’t follow-up to ensure that the necessary action is taken.
Other commonly alleged legal malpractice errors include breach of fiduciary duty, negligent drafting, fee disputes, failure to know the law and litigation errors.
What coverage options should you consider?
It is ultimately up to you to decide which option is best to protect your private practice. Here are some coverage options you can consider in New Jersey:
Prior acts: Basically, it tells you how far back in time your insurance policy covers you for services rendered to clients. Most policies are effective for one year and cover claims that are made known to the insured and reported within the policy year.
Limit of liability: This is the maximum amount the insurance company will pay for the coverage. Here, you will need to assess a suitable limit of liability against the cost of insurance.
Deductible: This is the amount you will pay in the event of a loss. In selecting the deductible, determine how much the insurance agency is willing to offer against how much risk you are willing to take on.
Watch this space for more insurance tips and news.