The Long Tail of the Law

Published April 9, 2013

Most legal malpractice insurance is written on a claims-made basis. This means that the policies provide protection against accusations of malpractice, provided that the incident in question as well as the date the claim is filed both occur during the policy period. A lawyer who gives a client advice in January, cancels malpractice insurance in May and then faces a malpractice claim in August concerning that advice will not be covered. This is true even if you simply switch your policy to a different malpractice insurer. And, of course, the time lag between the lawyer’s action and a malpractice claim can be and often is much longer, and can even come after the lawyer leaves practice.

I received an email from a sole practitioner who is approaching retirement and deplored this situation as a sword hanging over his head. He wrote: “If the local auto mechanic repairs a car negligently in such a way that causes a death, he is protected from personal liability by a six-year statute of limitations and by his corporate status. We lawyers have no such protection.”

There really is no good answer to this dilemma. The most practical way to have continuous malpractice insurance coverage after leaving practice or switching carriers is through tail coverage. This is an endorsement that extends coverage as a “tail” for a stated period of time after the policy’s end date. Such coverage may not always be available from a carrier, and even if it is, the cost will likely be high because no one – neither the lawyer nor the insurer – can be sure when a future claim might be filed or how large it might be.

Is tail coverage worth it? Consider a lawyer who dies unexpectedly and whose estate is probated. Suddenly, the estate is sued for malpractice because the plaintiff-former client was injured. Her matter was lost because the lawyer did not handle it before dying, resulting in the passage of a statutory time limit. A court could well rule that the lawyer’s estate is liable because the lawyer should have known that death was possible and taken steps to protect clients by designating a successor in the event of death. In such an instance, the state bar association may also designate counsel to wrap up matters that the lawyer did not, with the cost of counsel assessed against the estate. And of course, the lawyer’s heirs bear this cost if malpractice insurance is not continued. It is, indeed, a long tail that can wrap around a lawyer’s practice even after the lawyer is in the grave, but that is the reality of today’s litigious society.

Categorized in: Coaching, Ethics

Audience type: Small Law Firms, Sole Practitioners