Managing the malpractice debate

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To buy or not to buy still is an option for Wisconsin attorneys

When you run a practice, cutting costs often is a must. Bargain prices on everything from office supplies to office space can make or break your business.

For some, malpractice insurance might seem like a luxury you just can’t afford.

“Some lawyers might decide to roll the dice and hope they do not get a malpractice claim,” Tom Watson, senior vice president of Wisconsin Lawyers Mutual Insurance Co., said.
“They might think that the types of cases they are taking are not worth a lot of money, so even if there was a claim, the amount of damages would not be overwhelming. Or they might believe the chances of a malpractice claim are slim.”

In Wisconsin, that’s a risk attorneys are allowed to take, as the state does not require attorneys to carry malpractice insurance. But choosing not to protect yourself from professional liability is a risk.

“(It) is not unlike passing up auto insurance and driving your car in the hopes of avoiding an accident,” Watson said.

Wisconsin Lawyers Mutual Insurance Co. and the State Bar of Wisconsin offered the following advice and information for lawyers weighing whether malpractice insurance is an investment worth making.

What is malpractice?

Claims of malpractice come from failing to communicate with clients, missing court dates or statutes of limitation and not identifying conflicts of interest. To prove malpractice, a claimant must show that a mistake was made and that, if the lawyer had not erred, the original case would have been won.

What is malpractice insurance?

Malpractice insurance, or professional liability insurance, helps lawyers defend and cover claims that an attorney made a mistake or gave substandard service.

What types of policies are available?

Most malpractice insurance policies are “claims made” policies. That means a lawyer must report a claim of malpractice to activate coverage, and coverage is only offered during the time that policy is active. However, some policies can cover prior acts or, in the case of retiring attorneys, some policies can provide “tail” coverage, to protect lawyers even after they are no longer practicing.

How much does malpractice insurance cost?

Cost depends on the amount of coverage, the deductible, the number of years covered, an attorneys practice area and past claims, if any have been reported. Underwriters also consider whether an attorney is in practice full- or part-time.

Premiums tend to be less expensive for new attorneys, and the cost can increase as coverage needs grow. In the case of a new lawyer, annual premiums could range from $200 to $500, with a $1,500 deductible, for a one-year policy that covers up to $100,000 per claim or up to $300,000 for multiple claims in the same policy year, also known as aggregate.

How much coverage do you need?

Policies tend to fall in tiers. For example, $100,000 per claim with $300,000 aggregate, or $250,000 per claim, $750,000 aggregate, although some policies have limits of $10 million or more. When weighing how much coverage is right for you, consider the legal work you do, the assets you’d like to protect and the what level of coverage makes you most comfortable.

Will your premiums increase if you report a claim? Will claims damage your insurance record?

Lawyers with no claims can expect to pay lower premiums. But underwriters consider whether claims had merit, the amount of damages (alleged or actual), defense costs and the circumstances that led to the claim, as well as the attorney’s level of negligence, cooperation with the insurance company and claim history.