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Professional liability insurance is also referred to as errors and omissions (E&O),legal malpractice insurance, or professional indemnity. This type of insurance is designed to protect lawyers and law firms from financial losses. The financial loss may result from claims of negligence, errors, or omissions in the context of legal services. It serves as a safety anchor for legal professionals. This helps them navigate the complexities of the legal arena and also safeguards their financial health.
When we discuss Professional negligence, it means when a professional, for example, a lawyer, accountant, architect, financial advisor, etc. fails to fulfil the professional duties that they were hired to fulfil.
It is a well-known fact that when someone agrees to give professional services to someone else requiring these services, the hired professional must take “reasonable care” in giving these services. The same concepts apply in the case of legal services as well.
Legal malpractice insurance is a form of professional liability insurance tailored specifically for attorneys. This insurance coverage is important because even the most experienced and professional lawyers can face claims of professional negligence. Such allegations may arise from mistakes in giving legal advice, failure to meet deadlines, or inadequate representation, during the legal practice.
Here is a checklist for you to decide whether to have an attorney malpractice insurance policy or not.
If the answer to these questions is “yes” then you should have a professional liability policy.
We all understand that we may be the best when it comes to our jobs but we may make a mistake of and on. There are times when we have a dissatisfied client. It is here that E&O coverage protects you in the case that you make a mistake and that a client decides to sue you over it. It is not that in all cases, E&O claims are related to money. A claim can be made for issues, such as loss of prestige or emotional distress.
A professional liability policy covers your defence costs, as well as damages you are liable to pay. It also includes settlements reached in and out of court. Remember, it covers only unintentional acts of negligence. Some of the unintentional acts of negligence that E&O insurance covers consist of: Wrong Advice When a client loses money or suffers other damages as a result of taking advice from you that proved to be harmful to them. Misrepresentation When you promise to deliver a product or service in a specific way and at a specific time but you don’t keep the commitment. Failure to Communicate This includes any act where there is a failure to communicate or withhold important information and a general non-cooperative attitude. Conflict of Interest If a lawyer's personal or professional relationships compromise their ability to represent a client effectively, it can result in legal hassles. Breach of Duty Lawyers must act in the best interests of their clients. A breach of this duty, whether through intentional misconduct or a sheer lack of competence, can result in malpractice claims.
Legal malpractice insurance is important for several reasons:
Legal fees, court costs, and settlements can hugely impact a lawyer's financial stability. Malpractice insurance provides financial safety to cover these expenses.
Clients are more likely to trust attorneys who have malpractice insurance. It shows a commitment to accountability and professionalism. This also instills confidence that the lawyer has taken steps to reduce the risks related to legal practice.
If a lawyer is accused of malpractice, it can damage a lawyer's professional reputation. Having insurance allows lawyers to address claims quickly and professionally.
Having professional malpractice insurance is a regulatory requirement for practicing law. Failure to comply with these requirements may result in disciplinary action. A lawyer's license can also be suspended.
When lawyers or law firms seek professional malpractice insurance, they should consider the following important factors:
Policies have limits on the amount the insurance company will pay for a claim. Lawyers should assess their practice areas, and the potential financial impact of a claim to protect their interests.
Lawyers should know the difference between claims-made and occurrence policies. Claims-made policies cover claims made during the policy period. This is regardless of when the alleged malpractice took place. Occurrence policies cover incidents that happened during the policy period, regardless of when the claim is made.
Deductible means the amount lawyers are responsible for paying before the insurance coverage kicks in. A higher deductible can result in lower premiums. However, it may increase out-of-pocket expenses in the event of a claim.