Probably one of the most frequently asked questions we get from the many law firms with whom we work with across Tennessee relate to determining the appropriate limit they should select for their lawyers professional liability insurance policy. Upfront disclaimer- this is more art than science, and the formula we recommend is certainly not a one size fits all. Our friends at PLUS (Professional Liability Underwriting Society) have suggested the following 2 step formula that typically works well with law firms big and small.
Step 1: Take your 3 largest clients – if you were to have that proverbial error, act or omission that resulted in a damage to your client, what would that damage be for each of your 3 clients?
Step 2: Take the sum total of that amount, and take 80% of that number. Whatever this number is should be the firm’s limit.
Written by Graham Swafford