Here are the basic insurance needs for an attorney starting a new practice:
- General Property and Liability Insurance. A general property and liability insurance policy should include coverage for loss or damage to the contents of the attorney’s office (e.g., furniture, library resources, and computers) from perils such as fire and theft, along with coverage for most sources of third party liability (except malpractice claims, which normally are excluded and require coverage under a malpractice policy). Typical liability policies cover risks such as a client tripping in the office, employee-caused automobile accidents (in the course and scope of their employment), or even suits for malicious prosecution. In addition, as with any other business, a law practice should have coverage that includes liability for the attorney and all of his or her agents.
- Professional Liability (Malpractice) Insurance. Malpractice insurance, also known as “professional liability” or “errors and omissions” insurance, covers liability for an attorney’s professional negligence, such as the failure to file a suit before the statute of limitations has passed or any other error or omission that falls below the standard of care applicable to the case that results in a loss to a client. Most malpractice insurance provides “claims-made” coverage, which affords protection for claims made and reported during the policy period. Under a claims-made policy, if the policy is terminated and a claim is made after an attorney has retired or otherwise left the practice with respect to a matter previously handled, the attorney wouldn’t be covered. To get continuing coverage, attorneys should buy a policy “tail” that provides coverage for a predetermined period after termination of the general policy.
- Personal Health and Life Insurance. Attorneys seeking personal health and life insurance will need to investigate the wide range of private insurance plans available to the general public. An attorney who leaves a firm to start his or her own practice and who was covered by the firm’s group plan should determine whether a continuation of coverage is possible under federal or state law. Because of the relative high cost of private health insurance, solo practitioners should check into group insurance plans offered by various organizations, including the State Bar of California. The State Bar also sponsors term life insurance.
When looking to purchase insurance, check out the State Bar’s endorsement of several group insurance services designed to serve the needs of its members.
Get practical advice on all aspects of opening a law office in CEB’s California Basic Practice Handbook, chap 1.
Check out these CEBblog™ posts related to starting a law practice.
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