Question 1

What insurance does a law firm need?

Accepted Answer

At minimum, law firms need professional liability (legal malpractice) insurance, which protects against claims of negligence, errors, and omissions in legal services. Beyond that, most firms should carry a business owners policy (property + general liability), cyber liability insurance to protect client data, workers compensation if you have employees, and employment practices liability insurance. Larger firms often add directors & officers coverage and commercial umbrella policies.

Question 2

Is legal malpractice insurance required?

Accepted Answer

Only a handful of states mandate malpractice insurance for attorneys -- Oregon, Idaho, and a few others require it as a condition of bar membership. However, most state bars require attorneys to disclose whether they carry coverage, and many clients and referral sources expect it. As a practical matter, operating without malpractice insurance exposes your personal assets and your firm to potentially devastating claims.

Question 3

How much does legal malpractice insurance cost?

Accepted Answer

Premiums vary widely based on practice area, firm size, claims history, state, and coverage limits. Solo practitioners typically pay $2,500 to $7,500 per year. Small firms (2-10 attorneys) generally pay $5,000 to $20,000+ annually. High-risk practice areas like estate planning, securities, and real estate pay more than lower-risk areas like criminal defense. Prior acts coverage, higher limits, and adverse claims history all increase premiums.

Question 4

What is the difference between claims-made and occurrence policies?

Accepted Answer

Nearly all legal malpractice policies are claims-made, meaning they cover claims reported during the policy period regardless of when the alleged error occurred (subject to a retroactive date). Occurrence policies cover incidents that occur during the policy period regardless of when the claim is filed. Claims-made policies require continuous coverage and may need tail coverage (extended reporting period) when you retire or change carriers.

Question 5

What is tail coverage and when do I need it?

Accepted Answer

Tail coverage (also called an extended reporting period) allows you to report claims after your claims-made policy has ended. You need tail coverage when you retire, close your practice, switch to an occurrence-based carrier, or are acquired by a firm with a different carrier. Tail premiums typically cost 150-200% of your last annual premium and provide unlimited or multi-year reporting periods. Without it, any claims arising from past work would be uninsured.

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