All businesses owners should purchase the proper insurance to protect themselves and their partners from lawsuits and losses. Businesses that provide legal services also need insurance to protect against malpractice. Here's why:
1. Malpractice lawsuits can happen for many reasons. If any lawyer in a firm omits information when talking to a client, pursues a defense that is unlikely to win or otherwise makes errors that interfere with providing a client with the best service possible, that lawyer and the entire firm may be liable for malpractice. Malpractice can occur when doing a variety of tasks not related to going to court. For example, making a mistake when notarizing a letter for a client or making typing errors in a client's documents can cause those documents to be declared invalid by a court of law. If this happens, lawyers and staff involved in making the errors may be liable for malpractice. Professional liability insurance covers the law firm if malpractice occurs.
2. Malpractice lawsuits are expensive and create anxiety. Law firms can spend a lot of time and money on defending malpractice lawsuits. It's important to defend the firm as aggressively as possible against these types of lawsuits because they impact the firm's reputation; however, defending them appropriately can take time and energy away from helping clients. Professional liability insurance can help reduce some of the pressure on the firm to defend itself by providing attorneys to assist with defense. In addition, the insurance often covers most of the costs associated with malpractice lawsuits, so the firm won't have to pour its own money into defending itself against the lawsuit. This allows the lawyers working for the firm to continue to receive payment while the lawsuit is being dealt with.
3. Lawyers who were not involved with the original mistake can be named in a malpractice lawsuit. Clients have the right to sue the entire law firm as well as the lawyer who handled their case if malpractice occurs. Partners in the firm may therefore find themselves at the receiving end of a malpractice lawsuit even if they did not personally make any mistakes. Professional liability insurance therefore protects all the partners in the law firm, regardless of each partner's behavior towards clients, from malpractice lawsuits. It's a good business practice to protect all employees from financial or legal problems by purchasing insurance that covers them.
4. Most malpractice insurance carriers offer risk management education. Malpractice insurance companies don't want to have to pay out claims unless they have to. To help save themselves money, they often offer information and education about risk management to help attorneys avoid malpractice lawsuits. Insurance companies may offer information about topics such as how to disclose mistakes to clients, how to file and organize records or how to secure private data so that attorneys can put better practices into effect and lower their risk of being sued for malpractice. Some information may be given for free; lawyers also have the opportunity to attend low-cost seminars about risk management. Lawyers have to take a certain number of risk management courses per year, signing up with a professional liability insurance company that provides risk management education is often a cost-effective way to fulfill this requirement.
5. Malpractice insurance gives attorneys peace of mind. Clients have several years to file a malpractice lawsuit after their business with a law firm is finished. The exact statute of limitations differs from state to state; it may be up to three or four years after the fact. Having malpractice insurance usually guarantees that a law firm and all of its partners are protected from paying out-of-pocket for lawsuits based on old cases; thus, even if a lawyer had to disclose a mistake or otherwise suspects a former client may sue, the firm's partners don't have to spend the next several years worrying about potential financial problems resulting from lawsuits.
In addition to malpractice insurance, lawyers should carry general business liability insurance so that they are covered if a client injures himself while on the premises. Malpractice insurance is the most important insurance a law firm carries, as malpractice lawsuits can cost millions of dollars as well as harm a law firm's reputation.
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