Lawyers’ Professional Liability Insurance: Why You Need It and Where to Get It, 0217 COBJ, Vol. 46 No. 2 Pg. 79
| Author | Christopher B. Little, J. |
Whoops—Legal Malpractice Prevention
Christopher B. Little, J.
Lawyers' Professional Liability Insurance: Why You Need It and Where to Get It
Do you have at least $20,000 to defend a civil suit or more than $10,000 to defend an investigation by the Colorado Supreme Court Office of Attorney Regulation Counsel (OARC)? If the answer is no, and you don't have lawyers' professional liability insurance (LPLI), please take a moment to ask yourself why not.
LPLI might not be the most exciting topic, but it's an important one. This article explains the role of LPLI and the reasons for purchasing it. It also addresses the relationship between the Colorado Bar Association and the endorsed relationships it enjoys with ALPS Malpractice Insurance on a direct basis and HUB International as its broker.1
The Role of LPLI
In 2009, the Colorado Supreme Court, pursuant to CRCP 227(c), began requiring all private practice attorneys to disclose whether they carry LPLI. This disclosure is available to the public through the Office of Attorney Registration.2 Although LPLI may help protect the public, it's fundamental goal is to protect the insured. LPLI can protect the lawyer from career-ending claims or illegitimate suits and grievances. The concepts of the "case within the case" and doctrines like strict privity are not designed for enhanced client recovery, but rather to protect lawyers from unsubstantiated claims.3 Lawyers are not guarantors of client actions, decisions, or outcomes in lawsuits:
A lawyer does not guarantee results. He merely undertakes to use his best skill and judgment. A result unsatisfactory to the litigant scarcely justifies a suit charging the lawyers with fraud and conspiracy. Efforts of a lawyer to obtain an amicable disposition do not subject him to a charge of treason.4
Attorneys cannot be guarantors of success. Advising on risk is the nature of the business.5 The attorney's choice to purchase LPLI is a business decision, and it should be an informed one.
Who Needs LPLI?
Without question, solo and small firms of two to five lawyers have the greatest percentage of claims brought against them. A recent white paper by the American Bar Association (ABA) stated that 66.24% of all claims brought against attorneys between 2011 and 2015 involved solo and small firms.6 The ABA reported that the leading area of law for claims during this same four-year period was personal injury–plaintiff, followed by collection/bankruptcy, estate, trust/probate, and family law.7
Significantly, OARC determined that in 2016 nearly 2,300 solo firm practitioners did not carry LPLI.8 This represents approximately one-third of all private attorneys in Colorado who identify themselves as a solo practitioner.[9]
This statistic is concerning because no attorney is immune from risk.10 To protect themselves from claims, whether catastrophic or nuisance, all attorneys should consider purchasing LPLI. Attorneys are generally forbidden from limiting liability to a client.11 The rules about corporate structure and efforts to create companies to limit liability do not apply to attorneys. In fact, CRCP 265 addresses the need for an attorney to have insurance if a corporate structure is established. Many in the industry agree that carrying LPLI is a responsible business decision for the lawyer to make.12
Acknowledging the need for LPLI is an important yet straightforward first step. The next step—choosing a policy —is more nuanced. Questions to ask when selecting LPLI include: What are the limits? What is a reasonable deductible? Should costs and fees be inside or outside of coverage?[13] What consent to settle authority is granted to the firm? Does a hammer clause exist? Additional considerations include the definition of "professional services," prior acts coverage, gaps in coverage, retroactive dates, disciplinary proceedings defense, loss of earnings coverage, subpoena coverage, privacy breach investigation, coverage for network and privacy breach, retirement or extended reporting periods, extended reporting (tail) coverage, and employment practices liability insurance (EPLI) coverage. The range of LPLI continues to grow.
What about Cyber Liability Protection?
Although antiquated, Colorado statutory provisions regulate some of the issues attendant to a data breach. CRS § 6-1-715 regulates the confidentiality of social security numbers, and CRS § 6-1-716 specifies what lawyers must do if they encounter a security breach. Specifically, CRS § 6-1-716(2) states that attorneys who become aware of a security breach are obligated to:
conduct in good faith a prompt investigation to determine the likelihood that personal information has been or will be misused. The individual or the commercial entity shall give notice as soon as possible to the affected Colorado resident unless the investigation determines that the misuse of information about a Colorado resident has not occurred and is not reasonably likely to...
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