Lawyers need insurance too – protecting your business
By Charles Coffey, The Bar Plan Mutual Insurance Company
Note: This is the final piece of a three-part series from The Bar Plan Mutual Insurance Company. The first part (about legal malpractice insurance) ran Dec. 15, 2021, and the second part (about cyber liability insurance) ran Jan. 12. The author describes some of the common types of insurance that lawyers and law firms should consider purchasing. The coverages included are by no means an exhaustive list but are intended to provide you with a good starting point to determine the coverages that are necessary for you and/or your firm.
Business owner’s policy (BOP)
The Hartford explains that “A Business Owner’s Policy (BOP) combines business property and business liability insurance into one business insurance policy.”
A BOP generally includes three basic insurance coverages needed by business owners:
General liability insurance to help protect you from lawsuits when your business causes injuries or property damage. For example, if a client gets hurt at your office, this can help. It also helps cover claims of slander and libel.
Commercial property insurance coverage helps protect the physical location where you practice law. It also helps cover the items you use to conduct your legal business, whether it’s leased or owned.
Business income insurance coverage helps pay for lost income if you’re forced to shut down due to a covered property loss. This includes damage from fire, wind, or theft.
It is important to note that you can purchase these three types of coverages in standalone policies, but most people find it easier and more economical to purchase a BOP.
Workers’ compensation insurance
With rare exceptions, Missouri law requires a business owner to carry workers’ compensation insurance if he or she has five or more employees. This type of insurance provides benefits to your employees if they suffer illnesses or injuries because of their jobs. These benefits usually cover medical care, replace lost wages during recovery, provide disability benefits, and give death benefits in the event of a work-place accident that results in death. For the business owner, workers’ compensation insurance often helps cover legal costs if an employee sues because of a workplace illness or injury.
While planning for one’s own death is uncomfortable, it is necessary. Life insurance can help you take care of dependents, a spouse, and/or aging parents. It also often gets more expensive with age, so it is something that you should consider purchasing while young. When considering the amount of life insurance you need, consider things like your final expenses, outstanding debts, housing costs (remaining mortgage/rent expense, utilities, etc.), and the educational or medical needs of dependents.
There are two categories of life insurance: term and whole life. Term life insurance allows one to lock in a certain death benefit for a certain number of years. Within the term category, there are two types: renewable and level term. Renewable insurance has premiums that will increase annually as you age. while the premium for a level term policy remains the same throughout the term.
Whole life insurance also pays a predetermined death benefit while rates remain the same. However, unlike term life insurance, premium payments made on a whole life policy earn tax-deferred interest and sometimes dividends. You can also borrow against it (in the amount of the current value) or cash in your policy prior to your death. The downside to whole life insurance is that it is much more expensive than term.
Employment practices liability insurance
Employment practices liability insurance (“EPLI”) provides coverage for employment-related claims made against you and/or your firm. Such claims could include sexual harassment, age and disability discrimination, and wrongful termination. While this is common insurance for a business, a law firm can purchase policies specifically tailored to its needs that include coverage for things like the failure to make someone a partner, third-party claims brought by nonemployees for harassment or discrimination, and claims related to a nonprofit controlled by the law firm.
Business (commercial) auto insurance and non-owned auto insurance
Many people do not realize that most personal auto policies do not cover accidents that occur while traveling for the purpose of conducting business. Given this, business auto insurance is essential to protect you from uninsured personal liability for property damage, medical care, and personal injury.
Likewise, most personal auto policies held by your employees do not provide them coverage when they are traveling in their personal vehicle for a work purpose. Non-owned auto insurance protects your employees from uninsured personal liability for property damage, medical care, and personal injury.
Other miscellaneous insurance types
There are numerous insurance products made to specifically cater to the needs of lawyers and law firms. Here is a non-exhaustive list of a few of the more helpful ancillary coverages:
Commercial umbrella insurance, like a personal umbrella policy, would step in and cover damages that exceed the policy limit on your BOP.
Accounts receivable general business insurance provides protection if your accounts receivable data is lost. It can also provide coverage for interest on a loan you had to take out to offset uncollected monies.
Valuable papers and records insurance is valuable if your firm has several physical files. This policy covers the replacement cost of your records if the same were lost due to a covered peril.
Employee dishonesty insurance provides coverage in the event an employee commits fraud or embezzlement.
The Missouri Bar has assembled scores of resources for members looking to protect a practice. Members can learn more about the insurance options available from Missouri Bar member benefit providers here. The Bar Plan is a proud Missouri Bar member benefit provider and the only endorsed carrier of Professional Liability Insurance for The Missouri Bar.