Ask the Underwriter: What Exactly Is Lawyers Malpractice Insurance and How Does It Work?

Many lawyers are surprised to learn that their malpractice policy doesn’t work like their auto or homeowners coverage.

Understanding the Basics of Lawyers Malpractice Insurance

Over the years, I have had numerous conversations with lawyers who were designated as the administrative partner of the practice for the first time or who were going out on their own and had never dealt with the firm’s malpractice insurance. They all said a variation of the same thing – “educate me on lawyers malpractice insurance because I don’t know anything about it.”

Since many lawyers are unfamiliar with this coverage, we thought this would be a good space to discuss some of the basics of lawyer malpractice insurance. So, we will do that over the next few issues of “Ask the Underwriter.”

What Do We Call This Coverage?

To start, the coverage goes by several names – lawyers professional liability insurance, legal malpractice insurance, lawyers malpractice insurance, and lawyers E&O insurance. But we are talking about the same product – insurance to cover the negligent acts, errors, and omissions of a lawyer in the performance of professional services. Yet, this coverage is written on a policy form you may be less familiar with.

Occurrence vs. Claims-Made Policy Forms

Unlike auto and homeowners insurance that is written on the occurrence policy form, lawyers malpractice insurance is written on the claims-made policy form. The occurrence policy form covers incidents that occur during the policy period without regard to when the claim is made. For example, if the incident happens in year 1 when you were insured with carrier A, but the claim arises in year 2 when you now are insured with carrier B, the coverage would fall under the year 1 policy you had with carrier A because the incident occurred during that policy period. This is an oversimplification, but it conveys the concept.

The claims-made policy form, on the other hand, only covers claims that arise and are reported during the policy period. Thus, you must go to the current policy period, not a prior policy period for coverage. Again, lawyers malpractice insurance is written on the claims-made policy form.

Looking Ahead: What About Prior Acts Coverage?

So, if the claims-made policy only covers claims that arise and are reported during the policy period, how do you cover past acts, errors, and omissions? We will address Prior Acts Coverage in the next “Ask the Underwriter” article.