Can my law firm be denied malpractice coverage?

While malpractice insurance is available for virtually every law firm, not every carrier will accept every risk. Standard admitted market carriers have underwriting guidelines that may exclude certain practice areas, claims histories, or firm profiles. Common reasons for declination include a pattern of malpractice claims, particularly if claims are frequent, severe, or demonstrate systemic issues that have not been addressed.

Practice areas with the highest risk profiles, such as securities, class action plaintiffs work, or patent prosecution, may be declined by carriers that do not specialize in those areas. Individual attorneys with personal disciplinary issues, substance abuse problems, or patterns of client complaints may cause carriers to decline the entire firm if those attorneys cannot be excluded from coverage. Firms in financial distress or facing bankruptcy may also be declined because financial pressure can lead to corner-cutting that increases malpractice risk.

If your firm is declined by standard market carriers, surplus lines or excess and surplus carriers provide an alternative. These carriers specialize in harder-to-place risks and are willing to write coverage that admitted carriers decline. The trade-offs include higher premiums, potentially less favorable policy terms, and the absence of state guaranty fund protection if the carrier becomes insolvent. However, surplus lines coverage is legitimate insurance that satisfies client and court requirements for proof of coverage.

To improve your insurability, address the specific concerns that led to the declination. Implement documented risk management improvements, resolve any outstanding disciplinary issues, demonstrate financial stability, and work with a broker who specializes in attorney professional liability. Many firms that are initially placed in the surplus lines market can transition to standard market carriers after two to three years of clean claims history and demonstrated risk management improvements.