A question that frequently arises in the world of professional liability insurance is “what limits of liability should a lawyer or law firm carry?”
To me, there is a simple answer to this question.
There are two parts to a set of professional liability insurance limits. The first part is the “per claim” limit of liability. This is the most that an insurance carrier will pay for both the cost to defend any one claim and any subsequent “loss” or “damages” sustained from said claim. It stands to reason that the per claim limit of liability should be enough to cover both defense costs and a payout from a claim stemming from your highest valued case.
The second part of a set of professional liability insurance limits is the “aggregate” limit of liability. This is the maximum amount of coverage for the entire policy year. As the per claim limit should be selected to cover the worst of potential claims, your aggregate limit should be enough to cover your most expensive two or three claims.
If you find yourself thinking that your current coverage may not be suited to cover your biggest exposure, consult your broker on what the procedure and cost will be to obtain the limits you need. You may be pleasantly surprised at how little the cost is to improve your coverage.