Joe Barnard, CPA

I Only Take Small Cases. Do I Really Need E&O Insurance?

As a new attorney or a small practitioner, you may wonder if the protection of professional liability insurance is worth the price. Even if you’re only practicing law part time, are only taking small cases, or are working for a small startup business, your best bet is to carry E&O insurance.

Things Aren’t Always What They Seem

When you are just starting your career, branching into a new area of practice, or starting your own solo or small practice, you may take exclusively small, low-value cases. However, any case can take unexpected turns and become more complex or complicated. A simple slip-and-fall case with only apparent soft tissue injuries, for example, might skyrocket in value upon the discovery of hidden traumatic brain injury or nerve damage. As you uncover more facts in your cases, you may realize they are of much larger value or the stakes are much higher than you initially anticipated. This can increase your risk, too.

Your E&O Carrier Can Help You Avoid Malpractice

Large firms have entire departments focused on risk mitigation and management. Small firms and solo practitioners can enjoy similar advantages by partnering with their malpractice insurance carriers. Malpractice insurers share your interest in preventing the errors and omissions that lead to legal malpractice claims (and payments).

To help reduce mistakes and improve your skill and knowledge base, many carriers offer extensive risk management resources, including mentoring, advice hotlines, seminars, online materials, newsletters, and more, to their insureds. They can help you with issues like trust account management, fee sharing arrangements, engagement agreements, advertising rules, social media issues, conflicts of interest, establishing case management and docketing procedures, and much more.

Don’t Be Penny Wise and Pound Foolish

Malpractice insurers typically extend policies to new attorneys, especially those practicing in lower-risk areas of law, at very affordable rates because they represent a smaller risk for insurers than attorneys who have already been in practice for a number of years. Ultimately, four out of five lawyers will get sued for malpractice at some point in their careers; a professional liability policy you may buy in the future will not protect you from claims that arise today if you don't have coverage.

Foregoing an E&O policy in your first few years of practice to save a relatively small amount of money can result in liability and significant exposure to your personal assets in later years if a claim is brought against you related to actions or omissions during a period you did not carry coverage.

How Much Coverage Is Enough?

If you are a solo practitioner, work in a small firm, or are in-house counsel to a small business, most professional liability carriers have a wide variety of affordable options for E&O coverage. Discuss your practice areas, coverage options, and choices of deductible and coverage limits with your insurer to find the right policy for you at the right price.

What’s right for you will depend on the number and types of cases you handle, the potential amount of damages and defense costs should a claim arise, and the nature and extent of both your business and personal assets. Since most policies “deplete,” meaning the fees and costs for your defense are paid from the limit available to settle or pay a judgment on for a claim, make sure you consider the big picture when deciding on what coverage limits are best for you. If you have a very low limit (e.g, $100,000), your coverage limits may be exhausted before your case even goes to trial (leaving nothing to satisfy a potential judgment).

Considering Your Options? Contact ProDefender

If you’re weighing the pros and cons of legal malpractice insurance, contact ProDefender. We can help you understand the differences between policies and select one with the protection you need at a cost you can afford. Contact us today at (866) 434-8557 or click the link below.

 

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