Many of the lawyers I have consulted with over the years, have been surprised to learn about some of the unique “twists” when it comes to malpractice insurance:
1. The sooner you get it, the cheaper it is. That’s right, if you’re thinking about holding off for another year to save some money, it could actually backfire on you when you find the rates are HIGHER in each subsequent year than they might otherwise have been because you waited.
2. The high cost of “Tail” insurance. Unlike a typical liability policy that covers you for mistakes made WHILE you were insured, most malpractice policies only cover you if you are STILL insured by the company. Unless you BUY “tail” coverage.
In other words, you are covered in January by Company A, but cancel in February and buy a policy instead with Company B. Someone comes along in March & sues for something that happened back in January. Without a tail policy, yours is left swinging in the wind. Be sure to ask about the cost of tail coverage up-front to avoid finding yourself in a hostage situation with your carrier down the road.
3. Management, not the lack of substantive legal skills is the most common cause of malpractice. I’m not sure why this always surprises lawyers since they take lots of CLE courses on substantive legal issues, but hardly any on how to manage your law firm. In any case, taking steps to learn all the things they never bothered to mention to you in law school about how to manage your law firm can not only reduce your stress and increase your profits, but it can also earn you a break on premiums with several malpractice insurance carriers.
4. Not all carriers are rated the same. Be sure yours is “A” rated.
Hope this doesn’t keep anyone up at night
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