California lawyers should have professional liability insurance to avoid paying damages and expenses out of pocket if a claim is asserted against them. Those who do not have insurance must disclose that fact to each client in writing at the time of engagement. California Rules of Professional Conduct, Rule 1.4.2. Foregoing such insurance is like playing roulette with your livelihood because the risk of a claim being filed is high and the odds are clearly not in your favor.
Every four years, the American Bar Association’s (ABA) Standing Committee on Lawyers’ Professional Liability surveys insurance companies to obtain statistics on professional liability claims against lawyers throughout the United States. The ABA’s 2019 survey, “Profile of Legal Malpractice Claims 2016-2019,” reported that four out of five lawyers will get sued for malpractice at some point in their career, and that seventy percent of malpractice claims are filed against small firms of one to five lawyers. These statistics show the need for liability insurance; yet, they do not even account for claims against uninsured lawyers, complaints reported to the State Bar, attorney-client fee disputes, disqualification motions, cyber security breaches, and various other claims that lawyers could face. Any claim costs a lot of time and money to deal with regardless of merit. In addition to malpractice coverage, a liability policy could cover many of these other claims in whole or in part.
Many liability policies have an annual risk management (RM) budget built in. The purpose of a RM budget is to encourage the policyholder to obtain assistance in minimizing the particular risks of liability. Unfortunately, only a small fraction of insureds know they have the budget, let alone take advantage of it. Those who take advantage of it often use the money to hire an experienced legal ethics and risk management lawyer to assist with various liability concerns, such as updating fee agreements, organizing a legal ethics CLE tailored to the firm’s needs, reviewing the partnership agreement, revising firm policies and procedures, etc. Legal ethics, malpractice, attorney discipline and risk management are specialized areas of the law that are constantly changing as the legal industry transforms. Even lawyers need lawyers, especially when it comes to protecting your livelihood. Whether the RM budget is five thousand, ten thousand, or more, it is typically lost if it is not used during the policy year. Failure to utilize a RM budget within the insurance policy you are paying for leaves money on the table that should be benefitting you, your firm, and its clients. Contact your insurer today to determine whether your liability policy includes a RM budget and how you can utilize it before it expires. The ABA provides insurance resources: