Here’s an article, 10 Misconceptions About Malpractice Insurance, Phillip Fraim, Small Firm Business (3/28/05) that discusses some of the mistaken assumptions attorneys make in purchasing malpractice insurance. For example, Fraim points out that many attorneys wrongly believe that defense costs in a malpractice action do not affect policy limits (when they do) or that liability insurance will automatically cover grievance matters (when it doesn’t). And Fraim cautions attorneys not to assume that all policies are the same. As I have seen from my own personal experience, there are huge disparities in costs and benefits offered. Attorneys are wise to shop around when initially buying malpractice insurance, and shopping again if that annual renewal notice reflects a huge increase.
But Fraim himself makes at least one mistaken assumption that I could catch. He says:
9. LPL coverage is hard to find. There are probably more options for LPL insurance than ever before. Most states have a bar-related insurance company operating within their jurisdiction. Check with your state bar association or the Web site of the National Association of Bar Related Insurance Companies for more information.
Sadly, going through the bar is probably one of the worst ways to purchase malpractice insurance. (It should be the best, since in theory, the bar ought to be in the business of making it easier and less expensive for attorneys to obtain coverage) In two of the jurisdictions where I practice (MD and DC), the so-called “bar-related insurance company” doesn’t offer the lower costs, but rather is the company that pays the bar for the privilege of being designated as the state provider. When I shopped for malpractice insurance back in 2002 (since the DC designated provider that I had chosen was going out of business), the Maryland provider would not sell me coverage because the bulk of my business was not in Maryland. And when I finally found a new provider (recommended by a colleague), I learned that I had been grossly overpaying for coverage from the DC insurance provider.
My advice for malpractice insurance? First, don’t be scared off from purchasing it – it may be far less than you think. Second, seek recommendations from colleagues before making a purchase – and ask explicitly about coverage and price policies. Third, take the time to ask the insurance agent questions about what’s covered and what’s not. Malpractice insurance can buy a tremendous amount of peace of mind – but the benefits that it provides to us attorneys doesn’t justify over charging us.