This question is one I do get asked now and again. I am always surprised by it because I honestly don’t understand why a lawyer would ever decide not to; but more than a few do just that. The reasons I hear are many. Some try to justify their decision by declaring malpractice premiums are beyond affordable. Others will share if they are ever sued and an adverse judgment is entered against them, they’ll just declare bankruptcy. Sometimes a decision is made to try and protect personal assets in others ways. Then there are those who choose to self-insure believing the premium savings will more than offset any possible loss. And finally, there’s this excuse. “Having a malpractice policy simply invites claims. No insurance means no one will ever sue me because there’s no deep pocket.” I just shake my head over the naivety of that belief.
Lawyers and those in their employ can and will make a mistake from time to time. It happens. Should a significant misstep ever occur on one of your matters, what might the fallout be? Think about this as a member of our learned and honorable profession. Clearly the client will be harmed in some fashion. Now, put yourself in your client’s shoes and ask who should be held responsible, particularly if a financial loss is part of the equation? You know darn well what the answer is. After all, if a lawyer representing you on a personal injury matter blew a statute that resulted in a lost opportunity for any kind of recovery, you would expect to be made whole and you know it. This is why I don’t get the excuses. Purchasing malpractice insurance isn’t about protecting lawyers. It’s about protecting clients should something go wrong, which makes it, at least in my mind, the right thing to do.
If the above isn’t enough, here’s a little more to chew on. While numbers vary between the states and over time, approximately 4-5% of lawyers practicing in the U.S. will face an allegation of malpractice in any given year. I will admit that a significant number of these allegations will resolve without any loss being paid; but this doesn’t mean the claim will be impact free. Claims can easily take 6 to 24 months to resolve and defense costs on a claim with any merit at all can break that $25,000 mark before you know it. For lawyers who have chosen to forgo coverage, the time and money lost having to respond to an allegation of malpractice by managing their own defense can be significant.
Next, to address the affordability concern, understand that the initial premium is going to be much less than what lawyers who have been in practice and insured for a number of years will be charged. This is simply due to the fact that coverage will start from the date a policy is first purchased because you can’t buy coverage for work you’ve done in the past. In other words, newly insured lawyers have limited exposure because they don’t have a substantial amount of covered legal work under their belts yet. Yes, premiums will rise for a period of years as the newly insured lawyer does more and more work, but all things being equal, it should stabilize about six years in.
Finally, I’m going to take the “It’s the right thing to do” argument off the table for a moment in order to address those who buy into the de facto self-insure approach. If you count yourself as a member of this group, are you religiously setting aside whatever you would have spent on premiums to deal with an allegation of malpractice? All I can say is I’ve never come across a situation where that was happening; and truth be told, unless that pool is well into the six digits, it’s not going to be enough to put on a good defense, let alone cover a sizable loss. Leverage those dollars and buy a policy. You will never be able to build a pool of funds in the small firm self-insure model that comes close to the amount of coverage (not to mention peace of mind) that those same dollars could buy. But of course, we can’t take the “it’s the right thing to do” argument off the table because we are professionals who still have the privilege of self-regulation and our rules require that we protect the interest of our clients. Should the worst happen, what does this better than malpractice insurance? From where I sit, nothing does.
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