Everything You Need to Know About Insurance for Law Firms
Table of Contents
1. Why Does a Law Firm Need an Insurance Advisor?2. What Should a Law Firm Look for in an Insurance Advisor?
3. Why Is it Important to Choose an Advisor That Specializes in the Commercial Real Estate Industry?
4. What Should Our Law Firm Expect When Working with an Insurance Advisor?
5. What Insurance Coverages Are Most Important for Law Firms?
6. Are There Common Pitfalls When Buying Insurance for a Law Firm?
7. How Can an Insurance Advisor Help Our Law Firm with Claims?
8. Why is B. F. Saul Insurance the Right Advisor for Law Firms?
The evolving litigation landscape has completely altered the risks that a typical law firm faces in the process of serving its clients, making it more complex to protect your firm’s assets.
For decades, a law firm would have considered itself adequately protected with a good malpractice policy (also referred to as E&O insurance or lawyers professional liability), worker’s compensation insurance, and commercial property coverage. Today, the high frequency of litigation and the rise in nuclear verdicts place law firms at greater risk of a lawsuit stemming from issues far beyond those areas. Claims of sexual harassment, wrongful termination, and other employment practices are increasing. And if your firm is hit with a cyberattack that exposes your clients’ confidential or proprietary data, you could face a liability lawsuit.
As the risks grow, so does the complexity of protecting your law firm. Now, it’s no longer enough to focus on traditional malpractice coverage. And in a hard market, some coverages are difficult and more costly to obtain. Given the increase in social inflation (a rise in insurance claims costs beyond pure economic inflation), insurance companies are reducing their appetite for writing certain lines of coverage and combatting their mounting losses by increasing premiums.
An independent insurance advisor can help your law firm navigate this difficult landscape, identify your most likely risks, and recommend the most appropriate coverage at the right price. Through their objective advice and guidance, they’ll keep you informed of changes in the insurance market, gain a deep understanding of how your firm operates today and how it may be evolving, and leverage their access to a broad insurance market to structure and negotiate the best possible solutions.
Choosing an insurance advisor is much like choosing a law firm: It comes down to trust. You need to feel confident you can trust your insurance advisor implicitly to serve your best interests by helping to reduce your risk and protect your firm’s assets.
What makes an insurance advisor trustworthy in the eyes of a law firm? Private ownership is often a factor, especially at a time when many independent brokers are backed by private equity owners. In the quest to achieve aggressive financial goals, these backers don’t always prioritize investing in the resources to provide exceptional client service. Many law firms feel more comfortable working with a privately-owned insurance advisor that has the freedom to prioritize service and invest in the resources to deliver it. A private ownership structure also reduces the odds that the staff you develop fruitful relationships with will be replaced because the firm is rolled up into a larger entity.
Trust also comes from knowing you’re working with professionals who are experts in their field, ready to leverage their deep knowledge and experience for your benefit. While your attorneys are the experts in legal matters, you need to partner with the experts in reducing and protecting against risk with law firm insurance. Look for an independent brokerage with a stable, long-tenured staff that possesses many years of experience in professional services insurance, ideally with a track record of serving law firms. Never assume that the senior leaders you meet during the sales process will serve your account ongoing. It pays to find out who your firm will work with and ensure you’re comfortable with their credentials.
When you’re looking to build a long-term relationship with a trusted partner, the stability of the company is equally important. Working with a broker that has been in business for decades and is part of a larger organization can provide peace of mind and confidence that your advisor will be there for the long term.
B. F. Saul Insurance understands the nuances and complexities of protecting your law firm from risk.
An independent insurance advisor that works with law firms will be familiar with the complexities of the legal industry, will understand how a law firm operates, and will recognize that your firm’s size and the type of law you practice will impact your exposure to risk. On the other hand, a broker that only works with law firms periodically is likely to recommend the most basic coverages (such as malpractice or lawyers professional liability (LPL) insurance), but may not understand just how exposed a law firm can be to cyberattacks, claims of unlawful or improper employment practices, and other risks.
An insurance advisor that routinely works with law firms also brings strong relationships with insurance carriers that specialize in providing coverage for the legal industry. These carriers are accustomed to offering policy forms that address the types of risks that law firms typically face. Finally, a broker that specializes in your industry will keep current on evolving trends that impact law firm risk, based on loss and claims data across their own client base and the insurance industry as a whole. These insights equip the advisor to respond to fluctuating trends effectively and in real time.
An independent insurance advisor will take a proactive approach to reducing your law firm’s risk through the right insurance solutions.
An experienced law firm insurance advisor will meet with your team regularly to keep current on your business, understand how it’s evolving, and determine if any operational changes impact your coverage needs. For instance, doing work that falls outside your main areas of expertise could create unanticipated risk. Your advisor can also review your client contracts to ensure you’re meeting any stated insurance obligations in the most effective way or recommend contract adjustments that transfer some risk away from your firm. In addition, they’ll begin planning for your policy renewals well in advance, to ensure sufficient time to shop the market or adjust your budget if a premium increase is unavoidable.
Loss prevention is an important part of any risk reduction program, and that’s another area where the services of an independent broker prove valuable. By digging into the specifics of your culture, how your management team operates, and your IT policies and practices, they can recommend measures that can reduce your risk of a loss. When you’re open and transparent with your advisor, they gain a more complete picture of your business and can help you address risk proactively with the goal of heading off a claim.
How do you know what types of coverage you need to protect against your most common exposures? This guide can help.
Every law firm will have slightly different needs, based on factors like your size and practice areas. However, coverages such as the following tend to top the list of insurance requirements for law firms:
- Employment practices liability to protect against the rising incidence of wrongful termination, hiring discrimination, sexual harassment, and other employment-related allegations
- Cybersecurity insurance, especially as cybercriminals increasingly view law firms as a lucrative target and as more clients expect you to add cybersecurity requirements to your contracts
- Crime insurance, which covers you for theft or other crime that originates from outside the firm or internally (which happens more often than you might expect)
- Commercial umbrella liability coverage, which provides an additional layer of protection beyond your primary E&O policy and is becoming more critical for firms that handle particularly large cases and settlements
- Commercial auto insurance, which you might require even if your firm doesn’t own and provide company vehicles
- Property insurance that goes beyond a basic policy, ensuring that you comply with your lease requirements, have adequate coverage for a business interruption, and are covered in the event you sublease part of your space
- Fiduciary liability insurance to cover claims that your firm mismanaged its employee retirement plan
- Directors and officers (D&O) insurance, which covers incidents that trigger legal action against these professionals (a situation that occurs more often than you might expect)
One common pitfall that can prove costly is failing to pay sufficient attention to your defense cost coverage. Though many liability policies include coverage for attorney fees and other defense costs, some include those costs as a spend-down of the primary policy limits while others pay the fees outside the policy limit. Since the difference in these two approaches can be substantial, it’s important to check the policy language.
Maintaining an old policy form that no longer serves your needs is another frequent misstep. Your insurance needs will evolve as your law firm grows in size or as you diversify into other practice areas. However, many firms renew the same policies annually without evaluating whether the policy form is still the best fit. As a result, some of your policies might use outdated forms that don’t provide the full coverage you need, have gaps that leave you susceptible, or cause you to overpay for insufficient coverage. An independent insurance advisor will review your insurance policies when you first engage with them and again leading up to renewal to ensure your coverage continues to meet your firm’s changing needs.
Finally, be sure to check any policy’s “duty to defend” clause to be sure you understand what will happen if you experience a covered claim that results in litigation. Though the insurance company will provide legal defense and cover the costs, they have the right to select your defense attorney. Typically, they choose defense counsel from a list of attorneys who are vetted and have agreed to bill at the insurer’s permissible rates. In many cases, your firm won’t have the option to request an alternate attorney.
Get insights and practical advice on how to reduce your law firm’s risk of a cybersecurity incident.
Even with the most stringent loss prevention measures in place, your law firm might experience a loss that requires a claim. When that happens, you want to avoid the administrative headaches of the claims process and optimize the financial outcome.
An independent insurance advisor takes on the burden of navigating the complexities of the claims process and handling the time-consuming tasks of managing the claim on your firm’s behalf. But these administrative functions are just the start. Your broker also should serve as your claims advocate, negotiating with the insurer to bring the matter to an optimal outcome. Look for an independent broker that employs an in-house practicing attorney with expertise in commercial insurance specifically, since they will have the knowledge and experience to work with the insurer effectively and advocate for your rights. This holistic approach to claims management has proven to reduce out-of-pocket costs associated with a claim.
B. F. Saul Insurance has a long history of serving law firms throughout the mid-Atlantic region, particularly those that handle litigation and intellectual property work. Through our long-standing relationships with many leading law firms, our commercial insurance specialists have developed a strong understanding of the legal industry and know how to evaluate your law firm’s risks accurately.
Our team is uniquely equipped to identify the most appropriate insurance solutions to protect your assets, working with carriers that cater to the legal industry, and can recommend measures that help you prevent costly losses. With a licensed attorney on staff, we bring the unique ability to apply in-house legal expertise and concierge-level service to manage the claims process and optimize your outcome.
Our law firm clients appreciate the fact that we’re part of the B. F. Saul Company, one of the most successful privately-owned real estate companies in the country. They also recognize that our private ownership means we will provide an objective perspective, invest in the resources to deliver a superior client service experience, and keep your interests front and center.
Download our Law Firm’s Guide to Protecting Assets or Mitigating Risk. Then schedule a call with B. F. Saul Insurance to learn how we can help reduce your law firm’s risks, even as they evolve.