Business Insurance Risks Every Law Firm Should Understand
When you hear that an attorney is “hanging their shingle” you think of a lawyer starting a new practice on their own or with a partner or small group of attorneys. Besides providing professional services, the shingle represents the physical location a traditional law firm operates in and that clients come to visit. Let's go over the basics of Business Insurance terms relevant to your new practice:
Whether your firm rents space as a building tenant or you own your own building, your business, like any other brick-and-mortar entity, faces exposure from having a physical presence and interacting with the public. Commercial General Liability (CGL) is a standalone coverage option you might consider which is similar to, but a bit more robust than the liability portion of a Business Owner's Policy (BOP). Your BOP would provides very broad coverage for your firm's physical location for bodily injury, damage to rented property, or even libel or slander. The most common limits for CGL insurance are $1m/$2m and nearly all landlords and mortgage lenders (and many clients) require the business owner or renter to have $1m or more in CGL insurance.
Protecting your building or office space with just the property portion of a BOP would make sense for building owners, but as a law firm, you may also want to consider to what degree your computers, office equipment, furniture, and fixtures should be insured. You may include those items under the property section of a BOP policy, or in a separate coverage called Business Personal Property (BPP).
Another consideration (and this is important to lawyers) for your firm is Business Interruption Coverage, which as a portion of your BOP policy, would cover and pay for expenses and lost income when your physical location has been damaged or destroyed by a covered event.
Now let's consider the coverages for staff, you, and everyone else at your law firm. The most important to consider is Worker’s Compensation. Thirty-three states require by law that any business with 1 or more (W2 or 1099, part-time or full-time) staff carry workers' compensation insurance. Besides WA, WY, ND, VI and OH, which are “monopolistic states” (you must buy work comp from their state fund only) ALPS can quickly quote any law firm’s work comp insurance in all the other states we operate in.
One small but important detail is that monopolistic state funds typically don’t provide “Stop Gap coverage” or the employer's liability portion of the workers' comp insurance. You may have a client or government agency you engage with that requires your CGL or BOP policy to add “Stop Gap” in a monopolistic state. Lawyers and law firm staff are a “preferred class” in workers' compensation (as lawyers and law firm staff statistically file fewer Workers' Comp claims) so while you should get it, or in many cases are required to by law, this insurance is not expensive compared to other industries.
Another important risk to a small law firm regarding all staff and lawyers included is the handling and mismanagement of monetary funds. If a law firm handles trusts or large estates, even money transfers in real estate closings, employee dishonesty (Crime) and wire fraud (Cyber liability) are more important now than ever. Other insurance policies specifically exclude these sensitive and often very costly losses, so having a Cyber Liability Policy with its own stand-alone limits of a minimum of $100,000 should be considered by all solo and small firms. When a law firm has a number of attorneys or staff that also handle funds, a crime policy is likely necessary with a growing firm. We typically see firms of 3-5 or more attorneys and up to 10+ total staff requesting a Crime Policy, but even a solo firm may have the need.
Not only is the firm at risk within its four walls when staff steal or lose firm or client funds, but a law firm could also be liable for travel around your office location when staff or an attorney are driving their own car for meeting clients or running to court or the post office and become liable in an accident. Most small law firms don’t have the firm itself own a designated car, so hired and non-owned auto endorsed on a BOP policy is also very important to lawyers on the go. If your firm owns any vehicle, just like personal auto insurance, your firm would need to purchase Commercial Auto Insurance, which we can provide for those small number of firms who have title to a company vehicle.
Business Insurance can seem endless with all these different coverage types and options, but we typically start with a BOP and Workers' Compensation quote and then help you determine what else is necessary to fully protect your reputation, your assets, and the variety of liability your law firm is exposed to. Seven out of ten ALPS customers love the idea of a SINGLE SOLUTION for their law firm. If you're interested in speaking with ALPS about coverage options for your law firm, you can start a quote or schedule a consultation today.
Authored by: Kurt Whitmire, Director of Commercial Lines
Coming to ALPS with an extensive business background, Kurt brings a unique perspective on liability insurance to his role in business development. Having owned his own business Kurt understands what decision makers value. While liability insurance isn’t top of mind for every law firm on a daily basis, choosing the right carrier is certainly an important decision to make when the time is right. As a business owner, Kurt was working with partners that he knew would take care of his business when he needed them most. He understands that the firms he works with want the best value for their hard earned dollar and the peace of mind knowing that the firm can always rely on their partners. This relationship is often sold to firms but it is not always delivered. Kurt’s role at ALPS is to be a conduit between law firms and ALPS’ staff of underwriters, claims attorneys and others to deliver on ALPS unique and time-tested value proposition.