The ABA estimates that 4 in 5 attorneys will have to deal with a malpractice claim against them. No attorney in Wisconsin wants to face a malpractice claim, but if you practice law long enough, chances are someone will file a claim against you. Legal malpractice insurance exists to protect attorneys and their practices in the event of such a claim, but as the American Bar Association notes, the number and value of malpractice claims have soared in recent years. That likely means higher premiums for lawyers, putting them in a financial squeeze.
Given the increased numbers and costs of legal malpractice claims, attorneys should do what they can to reduce their premiums or, at minimum, slow the rate at which their premiums increase. Here are the seven critical factors that influence the price of legal malpractice insurance:
- Area of Practice: The specific legal fields in which a firm practices significantly affect insurance rates. Certain practice areas, such as intellectual property, class actions, securities, real estate, corporate tax, entertainment, and civil litigation-plaintiff, often see larger numbers of (and more costly) claims. This typically results in higher premiums for lawyers in those fields. Conversely, defense firms generally face lower risks of malpractice suits, though they still face the risk of things like disciplinary complaints.
- Location: Geographic location plays a role, as the cost of services and the risk of claims can vary significantly from one region to another. For example, firms in metropolitan areas, where insurers often charge higher fees, may face more claims and, thus, higher premiums than those in rural areas.
- Firm Size: The number of attorneys in a firm impacts the insurance rates. Unlike other professions where annual revenue might determine premiums, law firms are often assessed based on the number of practicing attorneys and the caseload each handles.
- Years in Practice: The length of time a firm or attorney has been practicing can influence insurance costs, with new attorneys or firms often eligible for reduced rates in their initial years of practice.
- Prior Claims: The history of past and pending claims can significantly affect not just the cost of the policy but also eligibility for coverage. Firms with recent claims may face higher premiums or may need to seek coverage through non-standard carriers.
- Desired Coverage Limits: The level of coverage a firm desires also influences the cost. Higher coverage limits typically result in higher premiums, although this can be mitigated to some extent by choosing higher deductibles.
- Risk Management Discounts: Insurers may offer discounts for firms that demonstrate effective risk management practices, such as using engagement letters, docket control, conflict of interest avoidance, and participation in continuing legal education courses. Firms that have been claim-free for a set period may also qualify for discounts.
Struggling with Rising Malpractice Premiums? WILMIC Can Help
Since 1986, the Wisconsin Lawyers Mutual Insurance Company (WILMIC) has worked to address the high costs and limited availability of malpractice insurance for attorneys in this state. Our primary focus is smaller firms with six or fewer attorneys, providing them with the resources they need to operate without fear of financial ruin in case of a malpractice claim. More than 90 percent of our policyholders stick with us for life, demonstrating our value to our customers. Call us today to learn more.