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When attorneys commit malpractice, aggrieved clients have the right to file a malpractice lawsuit. These cases work in much the same way that personal injury lawsuits (e.g. car accident cases) do. Typically, the liable party has insurance which steps in to pay for the victim’s damages. Although Connecticut does not require attorneys to carry malpractice insurance, most lawyers and law firms carry it to avoid exposing their business or personal assets to a legal claim. Before hiring any attorney, you should always ask if they carry malpractice insurance and the amount of coverage they carry.
But malpractice lawsuits can result in substantial damages, depending on the facts and circumstances involved. Clients therefore naturally worry about whether the attorney is carrying enough insurance to pay for these damages. The legal malpractice law firm of Stanfield Bechtel Law examines this issue more closely.
Understanding How Legal Malpractice Insurance Works
Professional liability insurance (legal malpractice insurance) generally pays for two categories of expenses:
- Indemnification: The costs to pay the damages awarded in a malpractice lawsuit or settlement. In other words, it pays for the lawyer’s liability to the client.
- Attorney’s fees: The lawyer’s fees and expenses to hire legal counsel to defend him- or herself. These may include a lawyer’s hourly fees, court costs, expert witness fees, and more.
As with other insurance policies, malpractice policies contain limits. These are the maximum stated amounts of coverage for which the insurance company will pay. Insurance policies often fall into a category known as wasting policies. What this means is that the resources that are used to fund the defense of a lawsuit are deducted from the policy limits.
For example, say the lawyer has a wasting policy with a $1 million coverage limit. $200,000 is spent in fees to defend the lawyer, but the court awards $1 million in damages to the aggrieved client. The $200,000 is subtracted from the $1 million, leaving only $800,000 that the insurance company will pay the client to satisfy the judgment. The lawyer or law firm’s assets would have to make up the difference.
Wasting policies sometimes contain a provision that allows for a certain amount of defense fees and costs to be paid before the policy begins to “waste.” For instance, the policy might allow $50,000 in fees and costs to defend the lawyer against malpractice. Only after this coverage is exhausted will the policy waste.
Other policies simply separate the amount of coverage available for indemnification and attorney’s fees. A policy might provide $1 million for indemnification and $500,000 for the lawyer’s legal bills.
How Consent Policies May Affect Coverage
Some malpractice policies are known as consent policies. This means that the insured attorney’s consent is required for any decision by the insurer to settle the claim. It’s worth noting that such consent may not be unreasonably withheld.
The effects on the client’s case, and the indemnification of his or her losses, can vary under one of these policies. For example, the insurer might be willing to settle the case in an amount that is satisfactory to the client. However, the attorney may strongly contest the allegations in the case (often because of the potential damage to his or her reputation), and therefore refuse to consent. Unless this refusal is considered unreasonable by the insurer, the lawyer’s resistance could delay a fair settlement for the plaintiff.
Conversely, the client (attorney who committed the malpractice) may give consent to settle the lawsuit within a particular amount. However, the insurer may decide to take a risk and go to trial if it believes that doing so is worth it. This will then force the aggrieved client to litigate the matter and seek the maximum damages possible from the jury.
Examining All of Your Options for Covering Your Losses
If your attorney has committed malpractice, you might be concerned about whether the lawyer’s insurance policy will cover your losses – or whether the attorney even has coverage. The good news is that you have options for winning what you need to cover your losses. We can explore those with you. To get started on your malpractice lawsuit or to learn more about how insurance coverage works, contact Stanfield Bechtel Law.