by Mark Bassingthwaighte , Esq .
Why You Should Never Say Never to Malpractice Insurance : The True Cost of “ Going Bare ”
I will admit I honestly don ’ t understand why a lawyer would ever decide to not buy a malpractice policy ; but many lawyers do just that and the reasons I hear are many . Some try to justify their decision by declaring that malpractice premiums are beyond affordable . They ’ ll tell me , “ Just look at what docs have to pay .” Others have decided that if they ever get sued they ’ ll just declare bankruptcy in order to avoid the loss . Then there are those who choose to self-insure thinking that the premium savings will more than offset any possible loss . I ’ ve even had attorneys tell me they ’ ve chosen to protect their assets in others ways . And then there ’ s this one . “ Having a malpractice policy simply invites claims . No insurance means no one will ever sue me because there ’ s no deep pocket .” I just shake my head over the naivety of that belief .
As lawyers we are to protect the interests of our clients . In addition , lawyers and those in their employ can and will make a mistake from time to time . None of us are perfect . In fact , even good lawyers who do great work can still get sued . It happens . We ’ ve handled such claims . The question , however , is this . Should a significant misstep ever occur on one of your client matters , what might the fallout be ? Think about the answer as a member of our learned and honorable profession . Clearly if and when a significant misstep occurs , the client will be harmed in some fashion . Now put yourself in the client ’ s shoes and ask yourself who should be held responsible , particularly if a financial loss is part of the equation ? You know darn well what the answer is . After all , if a lawyer representing you on a personal injury matter blew a statute that resulted in a lost opportunity for any kind of recovery you would expect to be made whole and you know it . You see , insuring for malpractice isn ’ t about protecting yourself . It ’ s about protecting your clients should something go wrong , and that ’ s the way it ’ s supposed to be .
Now let ’ s talk about a few specifics . While numbers vary between the states and over time , approximately 4-5 % of lawyers practicing in the U . S . will face an allegation of malpractice in any given year . Yes , it ’ s true that a significant number of these allegations will resolve without any loss be- ing paid ; but this doesn ’ t mean the claim has no impact . Time and money are going to be in play . Claims can easily take six to twenty-four months to resolve and defense costs on a claim with any merit at all can break that $ 100,000 mark before you know it . But that ’ s not all . Lawyers who are sued often see their income drop for a period of time , particularly if they ’ re self-insured and forced into devoting precious time defending themselves or if the situation has made it into the local news . Making matters worse , if the claim becomes something of a topic among the local bar and part of the story is that the involved lawyer is bare , it ’ s pretty much a given that good referrals from other lawyers are going to drop off .
Next , let ’ s discuss the affordability issue . While I get that the term “ expensive ” is relative to one ’ s financial reality , legal malpractice policies are nowhere near as expensive as some medical malpractice policies . In addition , the initial premium is going to be much less than what lawyers who have been in practice and insured for a number of years will be charged . This is simply due to the fact that coverage will start from the date a policy is first purchased because you can ’ t buy coverage for work you ’ ve done in the past . In other words , newly insured lawyers have limited exposure because they don ’ t have a substantial amount of covered legal work under their belts yet . The odds of a covered claim arising from a newly insured practitioner are going to be much lower than those for a lawyer who has been insured and in practice for ten years or more . Yes , premiums will rise for a period of years as the newly insured lawyer does more and more work , but all things being equal , it should stabilize about six years in .
Finally , let ’ s take the “ It ’ s the right thing to do ” argument off the table for a moment and just focus on the financial risks and realities in order to address those who buy into the de facto self-insure approach . If you count yourself as a member of this group , are you religiously setting aside whatever you would have spent on premiums to deal with an allegation of malpractice ? All I can say is that I ’ ve never come across a situation where that was happening ; and truth be told , unless that pool is well into the six digits it ’ s not going to be enough to put on a good defense let alone
28 THE VERMONT BAR JOURNAL • SPRING 2016 www . vtbar . org