A significant claim, a high-value client relationship, or a new contract requirement can quickly raise an important question for a law firm: Are our current legal malpractice insurance limits still enough?
A primary legal malpractice insurance policy is the foundation of a firm’s professional liability protection. However, as a practice grows, adds attorneys, handles larger matters, or begins working with institutional clients, its existing policy limits may no longer align with its exposure.
Excess legal malpractice insurance can provide an additional layer of protection over the primary policy. It may also help a firm obtain higher limits without replacing primary coverage that otherwise continues to meet its needs.
In this Q&A, we explain how excess coverage works, when it may be triggered, how it differs from umbrella insurance, and what law firms should consider when evaluating their current limits.
Excess coverage is an additional layer of insurance that sits above a primary legal malpractice insurance policy. It does not replace the primary policy and generally cannot be purchased as a law firm’s only coverage.
The excess policy provides additional coverage after the limits of the underlying policy have been exhausted, subject to the excess policy’s terms and conditions.
Some excess policies may be “follow form”, while others may include separate terms, conditions, exclusions, or reporting requirements. Law firms should carefully review the terms of each coverage before accepting it.
A “follow form” excess policy is generally designed to follow the coverage terms of the underlying policy, subject to the excess policy’s own terms, conditions, and exclusions.
They are related, but not the same. An umbrella policy is a type of excess insurance, but it does not typically extend over lawyers’ professional liability coverage.
For law firms seeking limits above their primary legal malpractice insurance policy, a dedicated excess professional liability policy may provide coverage that more closely aligns with the underlying policy and its coverage triggers.
An excess policy generally responds after the applicable limits of the primary policy have been exhausted, subject to the terms and conditions of both policies.
When a claim or potential claim arises, the firm should review and follow the reporting requirements of both the primary and excess policies. Prompt notice to all applicable carriers can help preserve the firm’s rights under the policies.
When a policy has been “exhausted”, it generally means that its available limits have been used up by covered loss payments, defense costs, or both, depending on how the policy is written.
An excess carrier may offer limits that match the primary policy’s limits. Depending on the carrier, the firm’s needs, and underwriting approval, lower or higher excess limits may also be available.
Excess coverage may be considered when a primary carrier cannot provide the limits a law firm needs.
This can be especially relevant when a firm is satisfied with its primary carrier and coverage but needs higher limits. Rather than replacing the primary policy solely to obtain those limits, the firm may be able to add an excess policy over it.
Larger firms often use excess coverage to obtain higher limits. It may also be appropriate for small to medium-sized firms handling high-value matters, complex litigation, corporate transactions, real estate matters, trusts and estates, class actions, or work for institutional clients.
In some cases, even solo practitioners may consider excess coverage because of their case volume, the value of the matters they handle, or client insurance requirements.
Excess coverage may be worth considering when a firm adds attorneys, expands into new practice areas, takes on larger clients, or increases revenue.
If your primary carrier cannot offer the limits the firm needs, excess coverage may be considered before or alongside other carrier options.
A law firm should review its insurance coverage and limits each year at renewal and whenever it experiences a significant change. These changes may include adding or departing attorneys, gaining major clients, completing a merger, expanding into new practice areas, or experiencing increased claim exposure.
Corporate clients, government entities, financial institutions, or referral partners may require law firms to maintain specific minimum limits before beginning or continuing an engagement.
Yes. In addition to increasing the firm’s overall available limits, excess coverage may help the firm meet insurance requirements included in a client contract.
However, a firm should not assume its primary carrier cannot provide the requested limits, even during the policy term. The firm can provide the contract requirement to its carrier or insurance agent and ask whether the primary limits can be increased. If the primary carrier cannot provide the necessary limits, the firm can then explore excess coverage options.
Yes. Some firms need limits that are higher than a single primary or excess carrier can provide. In those situations, the firm may purchase two or more excess policies, creating multiple layers of coverage to reach its desired limits or satisfy client contract requirements.
Many of the same factors considered for the primary policy may affect the cost of excess coverage, including the firm’s size, practice areas, claims history, requested limits, revenue, location, and risk management practices. The excess carrier may also consider the terms and limits of the underlying policy and the primary carrier providing that coverage.
Because excess coverage generally responds only after the underlying limits are exhausted, its pricing may differ from the primary policy. The actual cost will depend on the firm’s risk profile, the limits requested, the underlying coverage, and the excess carrier’s underwriting requirements.
To request quotes for excess legal malpractice coverage, a firm will need to provide:
Excess coverage may be available mid-term, but availability will depend on carrier appetite, underwriting approval, the terms of the current policy, and timing. Firms considering a mid-term change should discuss the request with their insurance agent and carefully review how the effective dates of the primary and excess policies will align.
Excess legal malpractice insurance can provide an additional layer of professional liability protection when a firm’s primary policy limits may not be sufficient for its risk profile, growth, client expectations, or contractual insurance requirements.
Before purchasing excess coverage, a law firm should evaluate how the excess policy relates to the primary policy, when coverage may be triggered, which reporting requirements apply, and whether the available limits align with the firm’s practice areas, revenue, attorney count, claims exposure, and client obligations. Because policy terms and underwriting requirements vary by carrier, reviewing the options with a professional liability insurance agent can help the firm identify potential gaps and make a more informed coverage decision.
If your firm is growing, taking on higher-value work, or facing new client insurance requirements, it may be time to review whether your current limits remain appropriate. The right combination of primary and excess coverage can help the firm prepare for changing professional liability exposures while maintaining coverage that supports its evolving practice.
Are your law firm’s current liability limits still enough? Request an estimate and speak with an agent about primary and excess coverage options for your firm.
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If a client suffers damages, they may sue you to make themselves whole. Professional liability insurance can provide protection against potential severe financial impact, emotional turmoil, and reputational harm. It can cover your legal defense and indemnity* in the event that an unexpected issue arises, and may provide you with defense counsel and the financial support required to handle the lawsuit. That way, you can continue to run your law practice without the distraction of handling the claim yourself. Depending on the policy, coverage may extend to court fees, administrative costs, witnesses, mediation, judgments, settlements, or other related expenses you could easily incur as a result of a claim.
Professional liability coverage can also protect your work for years to come. Most policies provide a free “tail” (Extended Reporting Period) after years of continuous coverage upon retirement. So even after you retire, there may be coverage for your past acts*. In addition, most coverage could also apply to other attorneys in the firm or non-attorney staff, keeping your entire organization protected from legal malpractice claims.
The amount of professional liability insurance coverage you should have depends on many different variables. The number of cases you take on each year, as well as the size and monetary value of the cases you are working on, will factor into how much coverage your firm will need. Other factors, including your location, the number of employees you have, the areas of practice you work in, and the limits of liability and deductibles, will also need to be taken into account.
How much insurance coverage you need will also depend on what limits of liability are appropriate. Your limits of liability will be offered in two ways:
It is important to keep in mind how quickly defense costs can erode your limits, possibly leaving you with little to no coverage for indemnification. Choosing the correct limits of liability is a very important decision. If a claim arises, even if it is baseless, increasing your limits after this occurs may not be an option.
The best way to look at it is like this: if you were to make an error and be sued by one of your clients, what would it cost you to defend (billable hours to a defense attorney) and indemnify (monetary judgment or settlement)?
A carrier’s risk appetite and underwriting restrictions vary. Some carriers will not offer more than $1M/2M limits to a solo practitioner or cap the limits offered to a firm practicing in “hazardous” areas of practice.
It’s important to be clear and open with your agent about what you need, because you have options.
In some cases of long-term relationships with carriers, the agent can explain the situation and needs to the carrier and may be able to obtain an underwriting exception.
And if the carrier is unable to be flexible on the offer, you have two other options:
No. The limits of liability apply to the whole firm.
This makes limit selection crucial to prevent underinsuring your law practice.
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