Steve Schwartz
As published in the May 2025 edition of Missouri Lawyers Weekly
When in doubt, report to your insurer all potential claims against you or your firm immediately. Don’t wait until the potential claim escalates. The failure to do so may prevent you from being covered for the claim.
Most legal professional liability insurance policies are claims-made policies, which means the policy covers claims made against you and reported to the insurance company during the policy period, or during an extended period for reporting claims. The extended reporting period will usually be 60 days after the policy ends, but could be longer or shorter, depending on the policy language. Unlike a typical auto or general liability policy, a claims-made policy covers claims made and reported during the policy period even if the alleged negligence or harm occurred before the policy period. The typical policy term is one year.
Because of the way the claims are covered, insurance companies require you to timely report all claims and potential claims or incidents before you renew a policy or buy a new policy. A potential claim or “incident” would usually be defined as any situation that could reasonably lead to a claim being made against the lawyer. This could include a missed deadline, a client complaint or just a bad result for the client. Even seemingly minor issues should be reported because they could escalate and become more significant later. It does not matter that you have an excellent relationship with your client, and you don’t think the client would ever sue you. You should report all incidents that could lead to a claim as soon as practicable, before you renew your insurance or buy a new policy. If you report a potential claim in one year, but you are sued two years later, the insurance company to which you reported the claim will be responsible for that claim, even if you changed insurers in the interim.
Some lawyers are reluctant to report potential claims or incidents to their insurer because they believe that merely reporting the claim will increase their insurance premiums. However, according to Gerry Kaestner, a partner at Kaestner & Berry Insurance Agency (an agency that caters to the legal community), it is best to report the potential claim and explain to the insurer that it is only a potential claim being reported to comply with the policy terms. Also, explain that you don’t expect it to turn into a claim, if that is the case.
When it comes to renewing your policy or buying a new policy, you can explain to the insurer any process changes you have made to avoid similar potential claims in the future. To rate your coverage risk, most carriers will look at what was paid out by that carrier or a prior carrier in both defense costs and indemnity payments. They will typically look at your five-year history. Unless you have an inordinate number of potential claims on your record, potential claims will not have a significant effect on your premiums. The ultimate cost of your insurance will depend on a number of factors, and a potential claim that does not result in money paid by the insurer will not likely be high on the list of factors.
The failure to timely report a claim or potential claim could have disastrous results. You could be left with no insurance coverage, and you would have to defend any lawsuit on your own dime. Even frivolous claims can be costly to defend. Legal malpractice coverage is not cheap. Because you are paying for the coverage, you don’t want to then have to pay for a legal defense or pay money to a claimant over and above your deductible. You can avoid all that expense and headache by being diligent in reporting potential claims and incidents to your insurance company timely.
Steven Schwartz is a certified mediator with Miles Mediation & Arbitration and a principal at Brown & James in St. Louis. He has defended lawyers in legal malpractice cases, malicious prosecution cases and ethics complaints for more than 35 years. He can be reached at sschwartz@bjpc.com. The views expressed in this article are not intended to be taken as legal advice.