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Law Firms

Attorneys, Independent Lawyers and Law Firms work in many different types of law. Some attorneys specialize in providing legal counsel to financial services companies. Other Lawyers specialize in disability cases. Still other law firms specialize in general practice. Each different type of law brings with it, the possibility to be liable for damages. With each unique type of risk there are specific insurance coverages that a business in the law profession may need. Here are 6 Coverages every all law firms should strongly consider.

Law Firms

Recommended Insurance Programs for Attorneys and Law Firms

Minimum recommended coverage:

General Liability
Professional Liability (Malpractice Insurance)
Property Insurance
Hired and Non-Owned Auto
Business Income with Extra Expense
Workers Compensation

Other coverages to consider for Law Firms:
Business Personal Property, Employee Dishonesty, Accounts Receivable, Computers, Valuable Papers and Records, Employee Benefits Liability, Umbrella Liability, Auto Liability, Building, Computer Fraud, Forgery, Employment Practices Liability (EPLI), Business Auto Liability and Physical Damage.

Insurance needs for Law Firms.

General Liability

General Liability Insurance is needed by all businesses. It is required by law in nearly all states for most businesses. This coverage will protect your business from the risks you face when the open public comes in to your facility. The risk of slips, trips, and falls is low because of the lack of a large volume of customer coming and going from the facility.

Professional Liability

Professional Liability risks are much higher in the Law Profession. Most Attorneys refer to this type of coverage as Malpractice Insurance. This type of coverage protects professionals who provide professional advice and services. This is at the heart of what lawyers do. If law firms offer advice to a client and the outcome is not desirable, the client has the ability to sue the lawyer for that advice. Even if the claims are unfounded, it can take an enormous amount of time, energy, and money for lawyers to defend themselves. This coverage can reimburse law firms for these costs up to the limits of the policy.

Property Insurance

Commercial Property Insurance is necessary if the law firm owns the property you operate your office. It is important to consult with your insurance agent about what exactly is and is not covered under your policy. The coverage will likely cover the building, structure and foundation; but if you have specialized equipment you may need additional coverage. If you live in an area where natural disasters are common (Floods, Hurricanes, Tornadoes, Etc.) you more than likely need this coverage or the damage resulting may not be covered.

Hired and Non-Owned Auto

If your business owns vehicles and you or your employees use those vehicles for business purposes than you need commercial auto coverage. More than likely, you do not own a business vehicle. Still you and your employees may periodically use your personal cars for business purposes. This is when a Hired and Non-Owned Auto Policy is necessary. Because the employee is in the car on business purposes than the liability to third parties is the liability of the business, not the individual. If your employee causes a wreck, the damages occurred as a result of that wreck are the liability of the business. This coverage will help in just these types of situations.

Business Income with Extra Expense

Business Income with Extra Expense Coverage will cover a law firm for loss of income suffered by a business when damage to its premises (by a covered cause of loss) causes a slowdown or suspension of its operations. Coverage applies to loss suffered during the time required to repair or replace the damaged property. The key part of this coverage is the covered loss portion of the policy. If your business is damaged because of a flood or an earthquake and you do not have this coverage, the business income and extra expense policy will not kick in. If the damage is because of a fire and it is covered by your commercial property policy, than the additional policy will kick in. For this reason it is wise to work with one insurance agent and make sure they are dealing with one or a few carrier to provide you optimal coverage. This will prevent gaps in coverage and speed up the time to process your claim.

Workers Compensation

Workers Compensation Coverage is required by law in most states for most attorneys. There are some exceptions in some states, so it might be worth your time to check with the proper governing agency in the state your law firm operates. Even if your business is eligible for an exemption it is more than likely beneficial for your law firm to still secure coverage. One expensive injury to an employee can result in a large cost to a business. In many scenarios the losses cause a business to close for good.

The risks associated with workers compensation are fairly low in this industry. Long term Repetition injuries like carpal tunnel may occur from employees sitting at a desk for long periods of time. Having adequate safety programs and offering desks that allow employees to stand may be beneficial to your business. This additional desk may be expensive, but an injured employee who is out of work for three months because of surgery can be significantly more expensive. Partnering with an experienced independent insurance agent can help you determine if you need this coverage.

Justice is found through the work done in Law Firms.

Attorney Liability Insurance Classification Codes

Commercial insurance companies use various liability classification systems in order to classify and rate coverage premiums for Lawyers. Here are the most common business insurance classifications for Attorneys:

Business Liability Category: Service Business

SIC Business Insurance Codes:

8111: Legal Services
9222: Legal Counsel and Prosecution

NAICS Liability Classifications:

541110: Law Office or Legal Firm
922130: Legal Counsel and Prosecution
541120: Notary Office
541199: All Other Legal Services

Business ISO General Liability:

66122: Lawyers Offices

Common Workers Compensation Class Codes:

8820: Attorneys—All Employees

A Hammer Clause Transfers Some Risk for Defending a Lawsuit Back to a Business From The Insurer if The Business Does Not Take a Recommended Settlement.

A Hammer Clause is a clause within an insurance policy that allows an insurer to compel the insured to settle a claim for an amount the insurer recommends. In some instances, a Hammer Clause is also known in some circles as a blackmail clause, settlement cap provision or consent to settlement provision. A Hammer Clause is usually a part of a directors and officers or errors and omissions insurance policy. The main purpose of this policy is to allow the insured to choose if they want to settle for what is offered or accepted by the “injured” party. Also known as the consent to settle provision, without this provision in a policy the insured is at the mercy of the insurance carriers desire to settle. Frequently, insurance carriers know the recommended settlement is the better outcome financially based on historical pay outs. The Hammer Clause can help a business determine if they want to fight the suit in court in an attempt to preserve the precious image of the company. When a business decides to do this, they take on some or all of the cost to fight the claim in court.

When Does a Hammer Clause Kick in?

A Hammer Clause kicks in when the insured refuses to settle for an amount the insured recommends. In many cases the insurance carrier will recommend to settle for an amount they feel confident will be less than the defense and indemnity costs of a particular lawsuit. Hammer Clauses have developed because insurance carriers deal with these situations fairly frequently. The carriers have reliable data to help them predict how much a lawsuit will cost. Business owners do not deal with getting sued very frequently, but insurance companies do. The Clause is typically there to encourage the business owner to settle for the recommended amount. In turn, the insured is penalized for not accepting the settlement only if the judgment amount plus defense costs exceed the amount for which the claim could have been settled. Frequently lawsuits among businesses are a time when pride and emotion can effect the judgment of many good business owners. The Hammer Clause is there to prevent pride from getting in the way of sound judgment. unfortunately, it does not prevent emotion from getting in to the way. It does spread the risk to the business owner who decides to take on the additional risk.

How Can a Hammer Clause Be Arranged?

There are several different ways a Hammer Clause can be arranged. The most common type of Hammer Clause is a Full and a Modified Clause. A Full Clause states that if the insured refuses to settle for the recommended amount they take on the full amount of the settlement costs. A Modified Clause is set up to give the insured the option of refusing to settle, but requiring them to take on some of the costs of this decision. If the costs amount to more than what was originally offered. Typically, if the insured refuses to settle than the costs will be shared at an amount of 50/50. It is not uncommon for some policies to go higher to a 70/30 split of the costs.

Important Facts to Remember About a Clause

The important part is that Hammer Clauses Exist and this is something a business owner should always speak about with their agent. A Full Hammer Clause is taking a lot of risk and it puts a business owner at the mercy of their insurance carrier. It is in the best interest of the carrier to settle quickly. For most businesses some version of a Modified Hammer Clause is best. A Modified Hammer Clause allows a business owner to make the decision for their business in the event they determine it is worth the reputation of the business to risk losing in court. When deciding what type of insurance policy is best for your business, it is important to speak long and honestly about a Hammer Clause with a skilled insurance agent.