One of the most problematic misconceptions I encounter is the belief that simply having a malpractice policy means you are covered for anything that might go wrong in your practice. Unfortunately, that’s just not the way it is. As with every other type of insurance, a malpractice policy is a contract with specific terms, conditions, exclusions, and triggers. A misunderstanding of any of those details can leave you exposed at the worst possible moment. With this in mind, here are a few common incorrect assumptions lawyers make about their coverage coupled with how to avoid being blindsided by them.
1. “If I’m sued, my policy will defend me.”
Not necessarily. Malpractice policies are claims‑made and reported contracts. Two things must be true before the insurer has any obligation to defend you. First, the claim must arise during the policy period, and you must report it to the insurer during that same policy period. If you wait to report a potential problem regardless of the reason, even if it’s just to wait and see if it blows over, you may unintentionally forfeit coverage. Late reporting is one of the most common reasons insurers deny claims and one of the easiest to avoid.
2. “My policy covers everything I do as a lawyer.”
Every malpractice policy defines who is insured, what activities are covered, and only covers activities done on behalf of clients of the named insured (Your firm). Gaps often arise when:
• You engage in moonlighting or provide professional services to clients of another firm.
• You fall prey to a wire fraud scam or disburse money to the wrong individual. (Property losses are often not the result of professional negligence.)
• You are an officer, director, or employee of a for-profit organization.
• You perform non‑legal professional services (e.g., render investment advice; or act as a real estate broker, consultant, business advisor, or title agent).
If an activity doesn’t fall within your policy’s definition of “professional services,” the insurer may decline coverage. Always thoroughly review the definition of professional services prior to purchasing a malpractice policy.
3. “I’m covered for work I did before I bought the policy.”
Not unless you have prior acts coverage. A policy without a retroactive coverage date only covers work performed after the policy’s inception. This means any mistake made before the policy started, regardless of when the claim arises, will not be covered. This can be especially concerning when you leave a firm to go solo, switch carriers, or allow your coverage to lapse. Never make any insurance-related decisions without first determining what the impact on your prior acts coverage will be.
4. “If I leave practice or retire, I’m still covered.”
If you are a solo, coverage ends when the policy ends unless you secure tail coverage. Absent a tail, any claim made after your policy expires will not be covered, even if the underlying work occurred years earlier. Whenever transitioning out of the active practice of law, always investigate your tail options.
5. “My policy covers intentional acts, sanctions, or fee disputes.”
Malpractice insurance is designed to cover negligence, not intentional wrongdoing. Most policies exclude dishonest or fraudulent acts, criminal conduct, sanctions and fines, and fee disputes. If a client alleges you intentionally misled them or if a court imposes sanctions your policy may not respond.
The Bottom Line: Coverage Isn’t Automatic, It’s Conditional
A malpractice policy is a powerful risk‑management tool, but only if you understand what it does and doesn’t cover. The biggest mistake lawyers make is assuming instead of verifying. Review your policy annually and focus on definitions and exclusions, report potential claims early, secure tail coverage when leaving the practice, and ask questions. Your insurer or broker is there to help.
To learn more about how ALPS can help your Texas law firm, visit alpsinsurance.com/texas.