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BACKGROUND AND GENERAL CONSIDERATIONS

            The practice of law involves guiding people and organizations through what are often tumultuous, complex, and emotion-laden transactions and occurrences. Often, the guidance has to be through the Byzantine court system.

            While it is a given that a lawyer should never tread into a legal area with which he or she is unfamiliar by experience or training, issues sometimes arise that must be handled, in the course of representing a client when that area is not within the area of legal expertise of Theories of Legal Liabilitythe lawyer.  Allowing the benefit of every doubt, it is fair to assume that most lawyers do not purposely do this, but that may not be uniformly the case. Sometimes the burden of earning a living or running a practice blinds the lawyer to how he or she should ideally operate.

THEORIES OF LIABILITY

            It sometimes happens that more simple mistakes are made when venturing into areas that are foreign to the lawyer. Some include:

(1)  allowing a legal statute of limitations to expire before filing suit;

(2)  failing to timely file an answer to a lawsuit and permitting a default to be entered against the client.  This results in an admission of the material allegations made against the client in the suit.  It is sometimes not possible to have the default set aside. Therefore, even if the client has valid defenses to the suit, he/she/it may be prevented from asserting them. An award of damages or other relief sought by the adversary may follow;

(3)  making a decision that is arguably more in the lawyer’s own interest than that of the client, and therefore breaching the fiduciary duty owing to the client;

(4)  failing to timely communicate with the client, such as by returning telephone calls. The lawyer may thereby fail to convey important facts about the matter being handled, or to learn from the client other important facts.

There are many more possible actions and inactions that can give rise to a lawyer’s liability to a client and a resulting malpractice claim.  Probably the most common category of mistake comes under the general heading of “negligence”, such as the first two examples above.

ELEMENTS OF NEGLIGENCE

            Negligence is generally defined as the failure of a person to attain that level of care that someone similarly situated (for example, having the same education, experience, and overall level of skill) would attain. That “someone” is often called the “reasonable man” (old term-not an affront to female lawyers…). Legal Malpractice Insurance Coonsiderations

            Yet another part of the definition is that the harm must occur to someone to whom or to which the lawyer owes a legal duty. In this case, it is usually the client. However, sometimes it may also be some other person who had a right to rely on the lawyer’s advice or actions.

Finally, a third-party must sustain harm as a “proximate” result of the negligence. The harm is usually, but not always, measured in terms of a financial loss. It can also be measured by other factors, such as the loss or diminished opportunity cost. “Proximate” refers to the fact that the negligent act must be the direct cause of the harm; stated otherwise, that “but for” the negligent act, the harm would not have occurred. 

OTHER THEORIES OF LIABILITY

The claim against the lawyer may be asserted based upon one or all of several theories of malpractice or wrongdoing. These include:

1.   Negligence:  The basics of a negligence claim are discussed above.

2.   Breach of contract:  In the context of legal representation, a contract is an agreement between a lawyer and a client for the lawyer to competently perform legal services for the client, and for the client to pay the lawyer.  The scope of representation should be clearly stated, as should the terms of payment.  A breach occurs of the lawyer does not perform competently, or the client does not pay the agreed fee.

3.   Breach of fiduciary duty:  A fiduciary duty is an obligation of the lawyer, founded upon “trust” to act solely in the interest of the client, even if doing so is contrary to his/her own or that of any other party.  That said, the Lawyer has a professional obligation to deal in total candor with the court.

WHY YOU NEED THIS COVERAGE AND HOW IT WORKS

            Lawyers have to make the baseline decision of whether or not to buy professional liability insurance. Some bar associations require some form of Legal Malpractice Insurance, and even have self-insurance funds through which to get it. If you participate in pro bono programs or some prepaid legal services programs, you may also have to maintain Legal Malpractice Insurance.

            Assuming that it's not a requirement of your practice, getting this coverage may boil down to a financial decision.  That is, like all other insurance, lawyer’s professional liability insurance is issued in return for a premium. The premium is the consideration for the protection afforded.  The amount of the premium depends upon several factors, including, how long you have practiced, the areas of law in which you practice, whether you share space with other Lawyers, and whether or not you have had prior claims; there are other factors, too.

            It is important to understand that professional malpractice coverage is separate and very different from Commercial General Liability coverage you might have to cover accidents and other occurrences within your office. This is because Lawyer’s Professional Liability Insurance, or Legal Malpractice Insurance, covers a Lawyer in the conduct of his/her/its activities as a legal professional. Commercial General Liability insurance does not cover professional liability or malpractice claims and furnishes no protection for you for those types of claims.

You are risking your assets, present and future, if you do not have this kind of coverage.  Nonetheless, the reality is that some Lawyers decide not to buy it and opt to “go bare”.   That decision may make sense under certain, very limited circumstances, but overall, is very risky and puts the Lawyer in real jeopardy.  This is because this coverage provides numerous benefits, including:

  1. If a claim is made against the lawyer, the insurer investigates it at its own expense.  This involves an adjuster taking statements, assessing that which the lawyer may have done or failed to do, and evaluating the damages claimed to have resulted.  The adjuster also assesses whether the damages that are claimed were the proximate cause of the lawyer’s negligence, breach of the representation agreement, or other wrongdoing.  In the course of the investigation, the adjuster will need to see the client’s file, perhaps take statements of all staff that worked on it, and perform other evaluations.  Although the lawyer may find this invasive, it is crucial, and a requirement of the policy, that full cooperation is given.

  2. If the insurer determines that the agent was negligent or breached the contract of representation, and that proximate damages resulted, it will attempt to settle the claim upon the best possible terms without risking a lawsuit.  This may or may not be possible.  The insurer has an obligation to the insured to settle within policy limits if that can be done.  Sometimes the policy provides that you, as the insured, have to approve a settlement.  Some policies also provide that you have to contribute a certain amount to the payment of the claim; this is similar to a deductible.  It is often called a “self-insured retention”.

  3. If the claim cannot be settled and you get sued, the insurer has an obligation to defend you.  This involves hiring and paying another lawyer to represent you in the lawsuit. It is critical that you cooperate and work with the Lawyer in the defense, attend depositions, and otherwise comply with all directives, much like you would require of your own client.  The failure to do so can jeopardize your defense and coverage under the insurance policy.  If you are found liable for damages, the insurer pays the award up to the limits of your coverage, subject to other applicable conditions of the policy (such as, exclusion for “punitive damages”.

The alternative to insurance is that YOU perform all the tasks and pay all the expenses.

Elements of Attorney NegligenceOTHER CONSIDERATIONS

1.   Ordinarily, the greater the deductible that you select, the lower the insurance premium. 

2.   This is because the insurer’s responsibility for payment is not triggered until the deductible has been exceeded. Therefore, you are in essence “self-insuring” for the amount of the deductible.  This does not generally affect the insurer’s obligation to investigate and to defend as discussed above. Therefore, you may want to consider as high a deductible as is reasonable to afford, because it will not become a factor until such time as a claim may be made.

3.   Lawyer’s Professional Liability insurance policies are usually issued as “claims made” or “claims made and reported” policies.  A “claims made” policy is one in which the act, error, or omission upon which the lawyer is accused must occur while the policy was in force or any earlier date established by the insurer as the “retroactive date” (sometimes called the “retro date”).  A “claims made and reported” policy is similar with the additional requirement that the claim be reported to the insured during the policy period.  Sometimes this type of policy has an extended reporting period.

4.   Some lawyers professional insurance policies provide that defense costs (attorney’s fees and court costs) are included within the policy limits. This means that the total amount of available coverage (“policy limits”) is reduced, dollar for dollar, by the amount spent by the insurer in defending the claim. If this is a provision of the policy that you are considering, you are potentially risking a great deal by electing low policy limits. This is because that in the event of a claim that goes to suit, defense fees and costs can quickly eat away at the indemnity benefit that was otherwise available to pay the claim.


Texas Lawyers Errors and Omissions Insurance is available for experienced and new Lawyers and others in the legal profession.

Lawyers Legal Liability Insurance coverage is made available as a stand alone legal professional liability insurance program or as a package policy in Texas which can include General Liability, Commercial or Business Property and the usual BOP type forms. Umbrellas are available as well.

This Professional Indemnity Insurance for Lawyers is often referenced by different names:

Insurance for Lawyers

Lawyers Legal Malpractice Insurance

Lawyers Insurance

Lawyer Professional Liability Insurance

Insurance for Attorneys

Lawyer Liability Insurance

Lawyer Legal Malpractice Insurance

Lawyers Liability Insurance

Lawyer Professional Liability Insurance

Legal Professional liability Insurance

All Legal Malpractice Insurance markets in Texas that your quote requests are matched with have been prequalified and Rated as B+ or A. Most providers of Lawyers Professional Insurance coverage you will find to be A+ Rated Underwriters or Agent Brokers of A Rated Underwriters. The Minimum Company Rating currently accepted is B+. Most all Professional lines will require Business, Owner or Guarantor Credit Scoring.

 

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