Legal malpractice insurance is one of the most important risk management tools for attorneys, yet it is also one of the most misunderstood. Over the last five years, claim trends have shown that even well-run law firms face allegations tied to administrative errors, communication breakdowns, and evolving client expectations.
Understanding what malpractice insurance covers and how it responds is essential for protecting both your firm and your reputation.
Core Purpose of Legal Malpractice Insurance
Legal malpractice insurance, also known as professional liability or errors and omissions insurance, is designed to protect attorneys and law firms from claims alleging negligence, errors, or omissions in the performance of professional legal services.
Coverage is typically triggered when a client alleges that an attorney’s actions or advice caused financial harm. Importantly, coverage applies to allegations — not just proven mistakes — which means defense costs often begin early in the claim process.
Types of Claims Commonly Covered
Claims data from 2020 through 2025 shows that the most frequent covered malpractice claims involve:
- Missed deadlines or statutes of limitation
- Errors in drafting contracts, pleadings, or filings
- Conflicts of interest
- Failure to properly communicate risks or outcomes
- Inadequate supervision of associates or staff
These claims often arise from operational or procedural failures rather than intentional misconduct. As law firms adopted remote and hybrid work models, insurers noted increased claims tied to documentation, communication, and workflow management.
Defense Costs and Legal Expenses
One of the most significant benefits of malpractice insurance is coverage for defense costs. Most policies cover attorney fees, court costs, and related litigation expenses incurred in responding to a claim.
However, policies differ on whether defense costs are included within the policy limit or paid in addition to it. This distinction can materially affect how much protection remains available to resolve a claim.
Who Is Covered Under a Malpractice Policy?
A standard malpractice policy generally covers the law firm as an entity, along with partners, shareholders, members, associates, and employees acting within the scope of their professional duties.
Coverage applies only to legal services defined in the policy. Activities outside traditional legal representation may require endorsement or separate coverage.
Claims-Made Coverage and Timing
Legal malpractice insurance is typically written on a claims-made basis. This means the policy in force when the claim is made responds, provided the alleged act occurred after the policy’s retroactive date.
Maintaining continuous coverage is critical, especially when switching carriers, changing firms, or retiring. Claims tied to work performed years earlier are increasingly common, particularly in transactional and estate-related matters.
Final Takeaway
Legal malpractice insurance is not just a compliance item it is a critical safeguard against financial and reputational risk. Understanding exactly what your policy covers helps ensure your firm is protected when allegations arise.
If you are moving from big law to starting your own boutique firm, schedule time with us here to start the process.