Rule 756(e) and the need for adequate professional liability coverage

In accordance with Illinois Supreme Court Rule 756(e) (Disclosure of Malpractice Insurance), every two years 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 or obtain malpractice insurance and report that fact as part of their registration in the year following.  This four-hour module is only available for MCLE credit one time.  After that, it is still required every two years.

The 2022 IARDC Annual Report states that 5,431 solo and small firm lawyers still choose to not protect themselves or their clients by purchasing professional liability (aka malpractice) insurance coverage.

Do all lawyers “need” professional liability insurance coverage?  Wrong question.  The better question is, “Should you have adequate professional liability insurance coverage to protect your firm and your clients from a potential financial loss?”  Homes almost never burn to the ground, but that is not a good argument to forego having adequate homeowners’ insurance.

Yes, every lawyer needs proper, adequate coverage.  Here are a few reasons why:

  • A claim can be asserted even if the allegation has no merit.  ISBA Mutual manages hundreds of claims every year.  Our average expense to defend a claim with low/no merit is about $28,000.  Litigated matters can cost hundreds of thousands of dollars in defense costs alone.
  • Every lawyer has an ethical obligation to protect their clients from financial loss.  Sometimes things simply go wrong, or mistakes happen.  Your client deserves to be made financially whole in the event of an error or oversight.
  • All ISBA Mutual policies include $25,000 of defense coverage for ARDC complaints.  Many ARDC complaints have the potential to become professional liability claims.  We help our policyholders properly respond to hundreds of ARDC complaints every year.
  • Saving a few thousand dollars a year and putting your business, personal finances, reputation, and clients at risk is not advisable.

When choosing professional liability insurance coverage, consider what “adequate” means.  The cheapest premium is sometimes the cheapest coverage.  Most importantly, consider adequate limits of liability.  Did you know a policy with a $1m per claim limit only costs about 25% more than a policy with a $250k per claim limit?