Small Firms Face Big Risks

Solo practitioners and small law firms account for the majority of attorneys in California. They also face a disproportionate share of malpractice claims — in part because smaller firms often lack the administrative infrastructure to catch errors before they become claims, and in part because insurance decisions get made quickly and without enough scrutiny.

Here are five of the most common — and most costly — insurance mistakes small firms make.

Mistake #1: Choosing the Lowest Premium Without Reading the Policy

It's tempting to compare professional liability policies on price alone. But two policies with the same premium can have dramatically different coverage — in ways that only matter when a claim is filed.

Key differences to watch for:

  • Retroactive date — Does the policy cover your past work, or only work done after the policy inception date?
  • Defense inside or outside the limits — Some policies pay defense costs within your coverage limits (reducing the amount available for settlement). Others cover defense costs in addition to your limits.
  • Hammer clause — Some policies require you to accept a settlement your carrier recommends. Refusing can reduce what the carrier will pay. Understanding this clause before you need it matters.
  • Exclusions — Some policies exclude specific practice areas or types of work. If your practice includes those areas, you may have less coverage than you think.

An independent broker can walk you through these differences before you commit to a policy.

Mistake #2: Letting Coverage Lapse Between Policies

Because LPL policies are written on a claims-made basis, coverage gaps are dangerous. If your policy lapses — even for a few days — claims filed during that gap may not be covered, regardless of when the underlying work was performed.

This most commonly happens when:

  • Attorneys switch firms and assume they're covered by the new firm's policy
  • Solo practitioners let a policy renew without verifying the new terms
  • Attorneys transition from a firm policy to individual coverage without coordinating the timing

If you're changing firms, retiring, or transitioning in any way that involves a coverage change, talk to a broker before any change takes effect. Gaps are preventable.

Mistake #3: Skipping Tail Coverage When Leaving a Firm

When an attorney leaves a firm — to join another firm, go solo, or retire — they often leave behind the professional liability coverage that protected their work at that firm.

The firm's policy typically covers claims against the firm, not individual attorneys who have departed. And if the firm later cancels its policy, claims against former attorneys may go uninsured entirely.

Extended Reporting Period (tail) coverage solves this problem. It allows you to report claims after a policy ends for work performed while the policy was in force. Tail coverage is especially important for:

  • Attorneys leaving a partnership or firm
  • Solo practitioners winding down a practice
  • Any attorney switching from one policy to a new one with a later retroactive date

The cost of tail coverage varies, but it's almost always far less than the potential cost of an uninsured claim.

Mistake #4: Assuming General Liability Covers Professional Mistakes

Many small firms carry a Business Owners Policy (BOP) or General Liability insurance and assume it provides broad protection. It doesn't — not for professional liability.

General liability covers bodily injury and property damage caused by your business operations. It does not cover:

  • Claims that your legal advice was negligent
  • Mistakes in documents or contracts you drafted
  • Missed deadlines or statute of limitations errors
  • Client losses resulting from your professional decisions

For attorneys, professional liability (malpractice) insurance is a separate and essential policy. Carrying general liability without professional liability leaves your practice's most significant exposure completely uninsured.

Mistake #5: Not Updating Coverage When the Practice Changes

Your professional liability coverage should reflect the work you actually do. When a practice evolves — adding a new practice area, bringing on a partner, or shifting focus — coverage that was appropriate before may no longer be adequate.

Common changes that should trigger a coverage review:

  • Adding a high-risk practice area — Real estate, securities, and family law (particularly in high-asset cases) carry elevated exposure
  • Adding attorneys or partners — Your coverage limits may need to increase
  • Taking on larger clients or matters — Standard limits may be insufficient for larger engagements
  • Acquiring another firm — Prior acts from the acquired firm need to be addressed explicitly

The right time to review your coverage is before these changes take effect — not after a claim reveals a gap.

Work With an Independent Broker

The common thread in all five mistakes is acting on incomplete information. Insurance decisions are easy to defer and hard to undo after a claim.

PRIA Brokers is an independent agency representing attorneys, law firms, and other professionals across California. We don't represent any single carrier — we compare options from multiple A-rated insurers to find the right coverage for your practice, your budget, and your risk profile.

Call (888) 998-PRIA or complete our Lawyers Professional Liability quote form online to get started.