In 1993 the Alabama Legislature enacted the Limited Liability Company Act which allows a member of a limited liability company to be liable for a "negligent or wrongful act or omission" in which he personally participates as though he were a sole practitioner (§ 10-12-45). If attorneys practice in an LLC, will that reduce their malpractice premium rate?
Probably not. LLC acts are still largely unconstrued by appellate courts due to their recent enactment in most states which have them. The practical effect of the protection purportedly afforded under an LLC statute is yet to be determined. In any event, it is clear that an individual attorney who is alleged to have committed malpractice under an LLC must still be defended and/or indemnified. Where more than one attorney in an LLC participates in a case or transaction, it is likely that all participants will be the object of suit. Whether, in theory, one attorney is the focus of a suit or whether all attorneys in a firm are, it is doubtful that the LLC act will decrease insurance exposure. AIM will, however, watch this matter carefully. As a mutual insurer, AIM is committed to fair and reasonable premium rates. If it becomes possible to reduce the cost of malpractice insurance for attorneys practicing in LLC's, AIM will do so.
If my firm forms an LLC, can an individual attorney be insured separately?
No, as in the case of a partnership, professional corporation, or other corporation, the firm must be insured. AIM requires that all attorneys who practice together, regardless of entity type, be insurable and insured under one AIM policy.