Quick answer
When a client alleges malpractice, the firm's first job is not to argue. It is to notify the carrier in writing, preserve the file, and stop communicating directly with the claimant. Under a claims-made policy the claim is covered by the policy in force when it is reported, and late notice is the most common reason a valid claim gets denied or defended under a reservation of rights. Defense costs in a defended malpractice matter commonly run from the mid five figures into six figures before any settlement, and a claim that goes to trial can exceed the policy limit in fees alone.
How the claim actually arrives
Almost never as a summons. In practice a malpractice claim starts as one of these:
- A demand letter from the former client or their new attorney, usually with a deadline and a settlement number.
- A State Bar complaint, which is a disciplinary matter, not a malpractice suit, but frequently the first visible signal that a client is unhappy.
- A fee dispute that turns into a cross-complaint for malpractice when the firm sues to collect.
- A notice letter from a successor attorney asking for the file and hinting at a claim.
- A lawsuit served on the firm with no prior warning, often years after the matter closed.
The last one is why the retroactive date matters more than the premium. A claim reported today can reach back to work performed years ago, but only if the work falls on or after the retroactive date on the current policy.
The first 48 hours, hour by hour
Hour 0 to 4: do not respond on the merits. Acknowledge receipt if a deadline requires it, but do not admit fault, do not estimate damages, and do not offer to refund fees. Anything the firm writes can be discoverable, and a well-meant apology can become the claimant's best exhibit.
Hour 4 to 8: pull the file. Assemble the engagement letter, the full correspondence history, the calendar entries, the drafts, the billing records, and the conflict check. Note whether the firm still holds the original file and whether the client has requested it. Missing documents become an allegation of spoliation later.
Hour 8 to 24: notify the carrier in writing. Use the notice provisions in the policy, not a phone call to the agent. Send the demand letter or complaint, the engagement letter, and a short factual summary. Ask for a claim number and the name of assigned counsel. Keep a copy of the notice with the timestamp.
Hour 24 to 36: preserve everything. Suspend auto-deletion on email and document systems for the matter. Tell everyone who touched the file, in writing, not to alter or delete anything. Litigation holds are cheap now and expensive later.
Hour 36 to 48: expect the carrier's first demands. Within the first two business days the carrier or panel counsel will typically ask for the complete file, a written chronology, the firm's conflicts position, a list of attorneys who worked the matter, the fee agreement, and confirmation of the current limits, deductible, and retroactive date. Some carriers also ask for a coverage statement about whether the firm knew of any circumstances before inception, which is where a coverage denial usually starts.
What the carrier asks for, and why
| Request | What it decides |
|---|---|
| Complete file and chronology | Whether the claim falls inside the insuring agreement |
| Engagement letter and scope | Whether the alleged work was even the firm's responsibility |
| Date the firm first knew of the issue | Prior knowledge and late notice defenses |
| Declarations page and retroactive date | Whether the work is inside the coverage window |
| Fee agreement and billing | Damages measurement, and whether fees must be disgorged |
| Conflicts check and waivers | Independent defense problems, and possible coverage exclusions |
| Prior claims and circumstances | Underwriting accuracy and rescission risk |
Answer all of it, in writing, and answer it once. Inconsistent answers between the application, the notice, and the chronology are what carriers point to when they reserve rights.
How defense costs actually accumulate
Defense in a malpractice matter is not a single bill. It runs in stages:
- Pre-suit investigation and coverage review: reviewing the file, interviewing the attorney, and drafting a position. Commonly a few thousand to the low five figures.
- Answer, affirmative defenses, and early motions: drafting, service, and case management. Commonly the low to mid five figures.
- Written discovery: document review and privilege logs are the expensive part, because the entire client file is potentially discoverable.
- Depositions: expert depositions and the attorney's own deposition drive cost quickly.
- Expert retention: liability and damages experts in legal malpractice are commonly billed hourly and can run five figures each.
- Mediation or settlement conference: preparation plus attendance.
- Trial: the least common and most expensive path, frequently six figures in fees alone.
Indicative ranges for a defended matter, which vary enormously by jurisdiction, firm size, and complexity: a matter that resolves by early mediation might land in the tens of thousands in defense; a matter that survives summary judgment and heads toward trial commonly runs into six figures. Those are market ranges, not quotes, and the carrier pays them from the limit or outside it depending on the form.
Defense inside versus outside the limit
This single policy term changes the math more than the headline limit.
- Defense inside the limit: fees erode the money available to settle. A $1M policy with $300,000 in defense leaves $700,000 for indemnity, and the firm funds anything above that.
- Defense outside the limit, or a defense sublimit: the limit stays available for settlement, which is why firms facing a genuinely contested claim often pay more for this structure.
Ask which structure the form uses before binding, and ask how it treats expert costs, appellate work, and a second claim from the same matter.
Three claims, start to finish
1. The missed deadline. A litigator misses a filing deadline and the case is dismissed. The former client claims the lost settlement value. Defense is usually focused on causation: what the case was actually worth, and whether the client would have prevailed. Damages are measured by the underlying case, not by the fee. Resolution is frequently a negotiated number after an expert values the lost claim. Discovery is document heavy and expert driven.
2. The drafting error. A transactional attorney drafts an agreement with a defective indemnity clause. The client pays a counterparty two years later. Here the fight is over scope: was the firm engaged to advise on that clause, and did the engagement letter limit the review? The engagement letter usually decides whether the claim is defensible.
3. The fee dispute that becomes a counterclaim. The firm sues for unpaid fees, the client cross-complains for malpractice, and the malpractice claim is often weak but expensive to defend. Many of these resolve with a negotiated offset. Note that suing for fees can convert a collections problem into a reported claim, so notify the carrier before filing.
What firms get wrong in the first week
- Telling the client too much. Informal reassurance becomes an admission.
- Waiting for the lawsuit. Notice provisions usually require reporting circumstances that could reasonably give rise to a claim, not just served complaints.
- Handling the file personally. The attorney who did the work is a witness, not defense counsel.
- Assuming the co-defendant's policy responds. It responds to claims against them.
- Letting the policy lapse during a move. A gap breaks continuous coverage, and the new carrier will not insure prior work.
- Buying limits based on revenue rather than on the largest matter the firm handles.
Limits, deductibles, and what the firm pays
Three numbers decide the firm's exposure: the per-claim limit, the aggregate, and the deductible or self-insured retention. The deductible is paid before the carrier responds, and defense costs often count toward it. Above the limit, the firm's own assets are exposed, which is why limits are commonly sized to the largest matter in the firm, not to annual revenue.
For a firm changing carriers, the retroactive date is a fourth number. A new policy that starts a fresh retroactive date at inception leaves every closed matter uninsured, which is exactly the exposure a claim reported today represents. Background: prior acts coverage and retroactive dates.
What to have ready before a claim ever arrives
- Engagement letters with scope language for every matter
- A calendar and docket system with a second set of eyes on deadlines
- A written procedure for conflict checks, including lateral hires
- A file retention and destruction policy that survives a hold
- A claims notification protocol naming who calls the carrier and when
- A current declarations page with limits, deductible, defense treatment, and retroactive date
- Contact details for the carrier's claims department, not just the agent
How PRIA handles it
PRIA Brokers (Professional Resource Insurance Agency, LLC), CA License #0G81238, writes lawyers professional liability for firms in California, Texas, Florida, Illinois, New Jersey, Nevada, and Delaware. We compare A-rated carriers, put the proposed retroactive date and defense treatment in writing before you bind, and walk through what the first 48 hours of a claim looks like on each form so the firm knows who to call before anything is filed.
Request an application packet and we will send the carrier forms that match your practice area, or compare lawyers malpractice coverage first. State-by-state limits are on the lawyers malpractice state hub.
General information, not legal or insurance advice. Defense costs, settlement values, and coverage terms vary by carrier, jurisdiction, and matter; confirm the current policy wording. Policy language controls.
To compare limits and carriers for a firm, start with the lawyers professional liability coverage overview.