This post is written by Joseph M. Flanders, a licensed attorney in the State of Indiana who has a started his own firm in Indiana and is in the process starting his own law firm in Minneapolis, MN. You can follow his thoughts on How to Start a Law Firm at his blog: Solo In Minneapolis.
Starting your own law firm is going to mean that you have a lot to worry about. After all, the firm is yours and it goes only as far as you take it.
To protect your law firm and your own financial well-being as a solo attorney, you are going to need legal malpractice insurance. Some states allow you to practice law without malpractice insurance, but you do so at your own risk.
When running a law firm, lawyers deal with many different kinds of people and many kinds of unique legal issues. Furthermore, even though you are helping a client with a legal problem, that doesn’t mean you won’t make a mistake. This can be true even if you were well intentioned during the representation. Mistakes can and do happen.
Additionally, you may not commit malpractice, but, as an attorney, you know that your firm can always be sued. Every lawyer can plan on being sued for malpractice at least once during their career. Questions to ask yourself when considering whether you need malpractice insurance are: How am I going to pay defense costs? Do I know anything about malpractice defense law? An old adage goes something like this: “an attorney’s worst client is himself.”
The next question becomes: “How much malpractice insurance do I need to start my own law firm?” There is no clear answer to this question, and you need to look at your clientele, the likeliness that your clients may sue you, and how big your practice is. You may not need as much malpractice insurance if you are just starting out. One good rule of thumb is to have at least one million dollars in aggregate liability coverage. Depending on the size of cases you work on, this could go a little lower or a little higher. Furthermore, you would be surprised out how cheap getting one million in malpractice insurance coverage can be.
Where do you get malpractice insurance? There are lots of sources, but I have found that reinventing the wheel is never the best way to start something. The American Bar Association (ABA) has website devoted to this legal malpractice insurance and they break it down by each state.
Another important point is that you want to research the companies on a list like the ABA’s. You want to make sure the malpractice insurance carrier is reputable. Furthermore, you may even want to have a relationship with your insurance carrier because you never know where referrals are going to come from.
Starting a law firm is all about relationships and leveraging your knowledge base. Choosing the right malpractice insurance is just one step in the long list of things you need to do to be successful as a solo attorney.