To Be or Not To Be… Insured
[THAT IS THE QUESTION!]
“To be, or not to be.” Originally, Hamlet asked himself this question to address his dilemma between life and death, this article repurposes the question to address the issue of whether lawyers should carry malpractice insurance (“E&O Coverage”). This article will begin by giving the excuses many attorneys use to justify not having E&O coverage. Then, this article will provide several reasons why these excuses only put the attorneys at greater personal and professional risk. Next, this article will look to other state’s rules regarding E&O coverage and how not having it impacts the attorney-client relationship and may arguably be a breach of your fiduciary duty. Lastly, this article will provide a short list of E&O coverage providers so you can find what policy best meets your needs.
1. Why do attorneys choose not to carry malpractice insurance?
In the state of Texas, all drivers are required by law to carry automobile insurance. This insurance is used to protect ourselves and others from injuries we cause by our negligent actions. I venture to guess that 90–100% of all practicing attorneys carry auto liability insurance. I also venture to guess that most attorneys carry homeowner’s insurance to protect themselves and their guests. Most, if not all, of us carry some form of medical insurance. In fact, many of us also carry life insurance policies to protect ourselves and our families. In all of the above listed scenarios, people are making prudent decisions to protect themselves and others from potential loss or liability. The same cannot be said for most lawyers in this state, when it comes to E&O coverage.
There are 96,671 licensed attorneys in the State of Texas. In my experience, at least ½ of the attorneys in this state do not carry malpractice insurance.
a) “I Cant’ Afford It”
Is it because E&O insurance is too expensive? No! My supposition is that 95% of all practicing attorneys can afford to pay the average annual cost of E&O coverage to protect themselves and their clients in the off-chance they drop the ball on their case. Below, I have broken down several different options that small-firms and/or solo practitioners can consider in when determining how much E&O coverage they can afford.
Cost of E&O Coverage for a Solo Practitioner
- The average annual cost for $100,000 in coverage is $1,325 (about $110 a month).
- The average annual cost for $250,000 in coverage is $1,850 (about $154 a month).
- The average annual cost for $1,000,000 in coverage is $2,400 (about $200 a month).
The above-listed averages should point you in the right direction about the amount of E&O coverage you can afford unless you have been sued many times. If that is the case, then these numbers do not apply to you and you will need to call for specific quotes.
b) “I Don’t Want To Be A Target”
In nearly 30 years of handling cases involving lawyer malpractice, I have polled hundreds of uninsured attorneys in Texas as well as in other states. When asked the reason for not carrying E&O coverage, the only reason attorneys give is that they do not want to “make themselves a target” to be sued. Think about that for a moment. Literally every attorney I have ever asked why they do not carry malpractice insurance, without fail or exception, has stated its because: “I don’t want to make myself a target.” I have news for you uninsured attorneys…you are still a target. More and more attorneys are willing to pursue claims against other lawyers for malpractice—even uninsured attorneys. So why not protect yourself—and more importantly—your client.
2. Why Attorneys Should Carry Malpractice Insurance
a) Having E&O coverage protects you from financial losses when sued for malpractice
With annual increases in litigation brought against attorneys, it is not a matter of “if” but “when” you will receive notice of a malpractice claim or lawsuit. Very few lawyers will go their entire career without being sued. Knowing that there is a high chance of being sued at least once in your professional career, why would you willingly expose your personal assets and money to potential liability as well as dedicating substantial funds to: a) paying to have a lawyer defend you in the lawsuit; and b) paying any settlement or judgment to get rid of the lawsuit?
As you can see from the above insurance quotes from 3 of the top insurance companies in Texas, the money you will pay on a monthly basis to carry malpractice insurance is inconsequential compared to the exposure you face if you’re sued for malpractice. The numbers show that attorneys are financially better off when they carry any amount of insurance, even if it is insufficient to cover the entirety of the loss. For example, if you handle cases that have values ranging from $100,000-$500,000, then you should carry at least $100,000-$300,000 in coverage. If you handle cases with values ranging from $500,000 – $1,000,000, then you should carry at least $250,000-$750,000 in insurance. This minimum amount of coverage is necessary because the chances are, even if the damage model in the legal malpractice case exceeds your available insurance policy limits—in my experience—roughly 90% of plaintiffs in a legal malpractice case will settle for your policy limits rather than pursue your individual assets. Having some insurance is a much better way of protecting yourself, your client, and your assets as opposed to risking everything by not carrying any malpractice insurance.
b) Clients want to know that their lawyer carries malpractice insurance
Another reason attorneys should obtain E&O coverage is that they can show their clients that they (the lawyer) is taking responsible steps to protect the client’s interest. Additionally, by being able to affirmatively tell your clients that you are insured for malpractice, you will be able to retain those clients who put great value on their attorney having E&O coverage. By retaining more clients, you will be generating more revenue for your firm and this extra revenue will help cover the cost of your E&O coverage.
c) Not having E&O coverage to “avoid being a target” is not in keeping with your fiduciary duty owed to your client.
As attorneys, we owe a fiduciary duty to our clients. This is the highest duty imposed by law. This means that we should not put our own interest ahead of our client’s interest. When applied to the attorney-client relationship, if an attorney refuses to carry malpractice insurance so that they are “not a target,” this is a de facto example of an attorney putting their interests ahead of their client’s interest.
If it is in your clients’ best interest that you maintain malpractice insurance coverage to protect them in the off-chance that you commit malpractice in the handling of their file, then I submit that we are duty-bound to carry insurance. Your desire to protect yourself, instead of your client, in the instance where you have committed malpractice, is putting your interest ahead of your client. The truth is, not carrying insurance is not in either of your best interests.
d) Hungry Attorneys Will Sue You
25 years ago, most of the successful legal malpractice lawyers refused to take cases against uninsured lawyer. Such is no longer the case! Many legal malpractice lawyers are no longer giving free passes to lawyers who intentionally choose not to carry malpractice insurance. Seasoned malpractice lawyers are now pursuing claims against lawyers who do not have insurance in order to discourage such practices. Additionally, there are more lawyers dabbling in the legal malpractice arena. These younger and hungrier lawyers are more inclined to take cases against uninsured lawyers. The belief is that if you are actively practicing law, then you have money and assets to satisfy a judgment against you. Therefore, the strategy of not having E&O coverage in an attempt to avoid a malpractice claim won’t be as effective as it was twenty-five years ago. In fact, I submit to you that if you commit malpractice, it is almost a certainty that you will be sued—regardless of whether you have insurance coverage. Therefore, you should protect yourself and, more importantly, your clients by carrying malpractice insurance.
e) Other States Require Attorneys to Disclosure Their Uninsured Status to Clients
As of March 2018, seven states require attorneys to directly disclose to their clients that they do not have professional liability insurance. These seven states have taken necessary steps to protect the people who rely on attorneys. As of now, Texas has not yet taken steps toward adopting any mandatory disclosure requirements. Such a rule, however, would only serve to benefit both the lawyers and the citizens of Texas. As stated above, mandatory disclosure would foster a sense of confidence between insured attorneys and their clients. I am optimistic that it is merely a matter of time before the Texas Legislature either requires lawyers to carry minimum liability limits, and/or requires mandatory disclosure to clients (in writing) that the lawyer does not carry malpractice insurance.
f) You Are A Fiduciary
As fiduciaries to our clients, I submit that our ethics require us to focus not on what we “can” do, but rather “what we should do.” We should protect our clients. We should carry insurance.
3. Parting Shakespearean Wisdom
This article began with Shakespeare’s “To be or not to be.” This article concludes with another quote from Shakespeare’s Henry VI where he said, “Let’s kill all the lawyers!” The good news for our profession is that most people do not really want to “kill all the lawyers.” However, attorneys who shirk their fiduciary duty to their client in an attempt to protect themselves not only harm the legal profession, but also may make Shakespeare’s quip more tempting to some very dissatisfied clients. Engaging in this self-preservation to the detriment of our clients perpetuates the negative image of our profession. I encourage all of you to contact a malpractice insurance carrier and obtain coverage to protect your clients’ interest and protect yourself from potential lawsuits. Below, I have listed names and telephone numbers of some of the top malpractice insurers in Texas.
- TLIE: (800) 252-9332
- DHIA: (512) 328-9310
- CNS Insurance Companies: (214) 528-1435
- Chubb Corporation (Underwritten by Federal Insurance Company): (908) 903-2000
- St. Paul Insurance Companies: (651) 210 – 7911
- Travelers: (860) 277-0111
- Zurich American Insurance Company: (512) 328-9310 or (800) 950-0551
- ALPS: 1 (800) 367-2577
- First Indemnity: (800) 982-1151
As always, if any of you have ethical questions on issues in your practice and need or want a “sounding board” for your particular situation, I am available to talk and brainstorm ways to help you and your clients. I don’t charge fellow attorneys for helping find a solution to their ethical questions.
Find more information on my website: www.Searscrawford.com. I post lawyers tips and other informative posts for both attorneys and clients. My goal is to protect clients, improve the integrity of our profession, and to help attorneys avoid malpractice claims.
Ross A. Sears, II
Sears Crawford, LLP
1200 Rothwell St
Houston, TX 77002