Professional Liability / Legal Malpractice — Frequently Asked Questions

Claims-made policies cover claims reported during the active policy period, regardless of when the alleged error occurred. Occurrence policies cover incidents that happen during the policy period, even if the claim is filed years later. Nearly all legal malpractice policies are written on a claims-made basis, which means maintaining continuous coverage is essential to avoid gaps. If you cancel a claims-made policy without purchasing tail coverage, future claims from past work would be uninsured.

Prior acts coverage, also called retroactive coverage, extends back to a specified retroactive date listed on your policy. This date is typically the first day you obtained continuous claims-made coverage. If you have maintained uninterrupted coverage since starting your practice, your retroactive date may go back to that original inception date. Switching carriers without negotiating a matching retroactive date can create a dangerous gap in coverage for past work.

No. A single professional liability policy covers all practice areas your firm handles, though certain high-risk specialties such as securities law, patent prosecution, or class-action work may require supplemental endorsements or higher limits. Underwriters evaluate your practice area mix during the application process and price the policy accordingly. Firms that add new practice areas mid-term should notify their carrier to ensure the existing policy language adequately covers the new exposure.

Switching carriers mid-term requires careful coordination. The new carrier must agree to match your existing retroactive date so prior acts remain covered. Your old carrier's policy will no longer respond to new claims once it terminates unless you purchase an extended reporting period, commonly called tail coverage. Many firms time carrier changes to coincide with their renewal date to simplify the transition and reduce the risk of leaving a coverage gap.

Most legal malpractice policies include defense costs within the policy limit, meaning every dollar spent on your defense reduces the amount available for a settlement or judgment. This is called an eroding or burning limit. Some carriers offer defense costs outside the limit for an additional premium, which preserves the full indemnity amount for the claimant. Firms facing high-value claims should carefully evaluate whether their limits are sufficient after accounting for defense spending.