Rule 756(e): The Need for Adequate Professional Liability Coverage
Under Illinois Supreme Court Rule 756(e) (Disclosure of Malpractice Insurance), Illinois lawyers who represent at least one private client and do not report that they maintain malpractice insurance are required to complete the Proactive Management Based Regulation (PMBR) Self-Assessment Program every two years or obtain malpractice insurance and report it. This requirement will be part of their registration for the following year.
The PMBR Self-Assessment Program is a four-hour module available for MCLE credit only once but remains a biennial requirement thereafter. Furthermore, the 2023 IARDC Annual Report revealed that 5,642 solo and small firm lawyers still choose not to protect themselves or their clients by purchasing professional liability (malpractice) insurance coverage.
Understanding Illinois Rule 756(e) and Its Implications
Rule 756(e) was established to ensure that lawyers practicing in Illinois maintain accountability and protection for their clients. The rule mandates that attorneys have malpractice insurance or complete the PMBR Self-Assessment Program every two years. This regulation aims to minimize the risk of financial loss to clients due to potential legal malpractice.
Many lawyers question whether they truly "need" professional liability insurance. The more pertinent question is whether they have adequate coverage to protect their firm and clients from financial loss. Just as homeowners' insurance is essential, even though houses rarely burn down, malpractice insurance is crucial for lawyers to safeguard against unforeseen legal claims.
The Risks of Inadequate Professional Liability Coverage
Even if an allegation has no merit, a claim can be asserted against a lawyer. ISBA Mutual handles hundreds of such claims annually, with the average expense to defend a meritless claim being about $28,000. Litigated matters can incur defense costs, reaching hundreds of thousands of dollars. These costs can devastate a lawyer's finances and reputation without adequate insurance.
Every lawyer has an ethical obligation to protect their clients from financial harm. Mistakes can happen; when they do, clients deserve to be made whole. Adequate professional liability insurance ensures that clients are financially protected in case of an error or oversight.
Additionally, ISBA Mutual policies include $25,000 of defense coverage for ARDC complaints. Many ARDC complaints have the potential to evolve into professional liability claims. ISBA Mutual assists policyholders in responding to hundreds of ARDC complaints each year, providing critical support and protection.
The Importance of Adequate Coverage
It is not advisable to save a few thousand dollars annually by foregoing professional liability insurance. This decision puts the lawyer's business, personal finances, reputation, and clients at significant risk. When choosing professional liability insurance, it is essential to consider what "adequate" coverage means.
The cheapest premium often equates to the least comprehensive coverage. Lawyers should evaluate adequate limits of liability to ensure they are sufficiently protected. For instance, a policy with a $1 million per claim limit costs only about 25% more than a policy with a $250,000 per claim limit. The marginal increase in premium provides exponentially greater protection.
Choosing the Right Professional Liability Insurance
When selecting professional liability insurance, lawyers should consider several factors to ensure they obtain adequate coverage:
Coverage Limits: Assess the policy limits to ensure they sufficiently cover potential claims. Higher limits provide more comprehensive protection.
Defense Costs: Evaluate whether the policy includes coverage for defense costs, including ARDC complaints. Defense costs can be substantial, and having this coverage is crucial.
Policy Exclusions: Understand the policy's exclusions. Some cheaper policies may exclude critical coverage areas, leaving gaps in protection.
Reputation of the Insurer: Choose a reputable insurance provider with experience handling legal malpractice claims. A reliable insurer like ISBA Mutual offers expertise and support when dealing with claims.
Customer Support: Consider the level of customer support provided by the insurer. Effective communication and assistance are vital during the claims process.
The Ethical Obligation to Clients
Lawyers have an ethical duty to protect their client's financial interests. This responsibility extends to ensuring that they have adequate professional liability coverage. Clients trust their lawyers to act in their best interests; having the right insurance is critical to fulfilling this trust.
Professional liability insurance provides a safety net for clients, ensuring they are compensated in the event of legal malpractice. It also protects the lawyer's reputation and financial stability, allowing them to serve their clients effectively.
Embrace the Requirements of Rule 756(e) with ISBA Mutual
Rule 756(e) underscores the necessity of maintaining professional liability coverage or completing the PMBR Self-Assessment Program every two years. This requirement is a regulatory formality vital to protecting lawyers and their clients.
Complying with Rule 756(e) and securing adequate professional liability coverage is a prudent decision for any practicing attorney. It ensures financial protection, upholds ethical obligations, and safeguards the lawyer's reputation and career. At ISBA Mutual, we are committed to supporting lawyers in meeting their professional liability needs. Our policies are designed to provide comprehensive coverage and peace of mind, enabling you to confidently focus on your practice.
For more information about Rule 756(e) and professional liability coverage, please contact the Illinois professional liability firm of ISBA Mutual Insurance Company.
