How do lateral hires affect my firm's insurance?

When a law firm hires a lateral attorney, the firm's malpractice insurance is directly affected in several ways that require proactive management. The firm's existing policy typically extends coverage to the new attorney automatically for work performed after their start date, but the transition requires attention to prior acts, claims history, and premium implications.

Coverage for the lateral hire's future work at your firm is straightforward. Once the attorney joins the firm, they are covered under the firm's policy for all legal services they perform as part of the firm's practice. Most policies define insured attorneys broadly enough to include new hires without requiring a formal endorsement, though you should notify your carrier of any additions to the attorney roster.

The more complex issue involves the lateral hire's prior acts. Work the attorney performed at their previous firm remains covered under that firm's policy, not yours. If the departing firm maintains its malpractice insurance, claims arising from the lateral hire's prior work should be covered by the prior firm's policy. However, if the prior firm dissolves, fails to purchase tail coverage, or allows its policy to lapse, the lateral hire may bring uninsured exposure with them.

To manage this risk, conduct due diligence before making a lateral hire. Request confirmation that their prior firm maintains active malpractice coverage. Ask whether the departing firm has purchased tail coverage that will protect the lateral hire for claims arising from their previous work. If there is any uncertainty about prior coverage, discuss the situation with your own carrier, as some insurers can extend your firm's prior acts date to cover the lateral hire's previous work, though this may come at additional cost.

The lateral hire's claims history also affects your firm's insurance. If the incoming attorney has a history of malpractice claims, your carrier will factor that into your premium at renewal. Some carriers require notification of lateral hires with adverse claims histories and may adjust the premium mid-term.

Practice area is another consideration. If the lateral hire practices in a higher-risk area than your existing attorneys, your firm's blended rate will increase. For example, adding a real estate attorney to a firm that previously focused on criminal defense will likely trigger a premium adjustment. Discuss the hire with your broker before finalizing the offer so you understand the premium implications.