3 Areas of Practice with High-Cost Malpractice Suits
Legal malpractice lawsuits are both time consuming and costly for all law firms, but the average costs of malpractice suits can and often do vary based upon the area of law. While some areas of practice experience a high frequency of malpractice lawsuits, others have experienced much higher severity in terms of costs for defense and settlement.
The average cost of defense and settlement for a legal malpractice lawsuit in Oklahoma is approximately $70,000. However, in some areas of practice this cost can increase dramatically to hundreds of thousands or even millions of dollars – exhausting the limit of insurance coverage and leaving attorneys to shoulder the burden of excess costs. (You can also read our list of areas of practice with the most frequent malpractice lawsuits.)
Legal malpractice insurance, like all insurance, is a means of transferring risk from the law firm to the insurance company. The tragedy, however, comes when a firm has insurance, but not enough insurance. Attorneys must consider how much insurance coverage is prudent when considering the potential malpractice lawsuits they may face. To do this, it is vitally important that lawyers take into account their areas of practice, as well as the average case value in the firm. That said, there is unfortunately no magic formula. It’s always best to buy what you can comfortably afford.
Areas of Practice With the Highest Claims Severity (Cost)
1. Natural Resources Law
With the prominence of oil and gas production in Oklahoma, claims in this area are not high in number, but do have potential for severity. In fact, these claims have historically been some of the most costly to defend. It is therefore advisable that lawyers who practice in this area purchase a professional liability policy with a suitable limit.
2. Business Transactions / Commercial Law
This area of practice is moderately high in frequency and claims can be severe. Nationwide, most claims in this area are generated by firms that just dabble in this line of business. OAMIC has found that over the past decade, 90% of malpractice claims originating from transactional law cases have come from firms that dedicate less than 30% of their time to this area. Contrary to popular belief, this is not an area without risk. If you practice in this area, carefully consider adequate limits.
3. Personal Injury (Defendant)
Personal injury (defendant) cases are generally low in frequency and high in severity. In the last two decades, cases from the defense side have made up 2% of our claim total and yet the average cost of these claims is approximately $136,000. Many personal injury (defendant) cases involve bad faith lawsuits. They typically arise when a defense firm allegedly offers the poor advice to an insurance company who loses at trial. during a bad faith suit. These malpractice claims can be difficult to settle. In Oklahoma, an insured may recover both actual and consequential damages due to bad faith. Also under Oklahoma law, emotional distress damages are available. This greatly impacts the cost of the underlying bad faith suit, and consequently the cost to settle the malpractice claim.
Make Sure You’re Adequately Protected
If you are practicing in any of these areas of law, in which severity of claims could be an issue, carefully to consider your professional liability insurance provider and insurance. Oklahoma Attorneys Mutual Insurance Company is the only insurer owned by members of the Oklahoma Bar Association. If you do have a claim, you’ll appreciate the difference that in-state experts provide. OAMIC gives you peace of mind so you can concentrate on your law practice.