Do You Need Higher Limits? Understanding Higher Limits Endorsements
Selecting the right level of professional liability protection is one of the most important decisions a lawyer or law firm makes each policy year. While many attorneys renew their malpractice coverage without much adjustment, evolving practice areas, rising claim costs, and increased client expectations mean that your existing limits of liability may no longer be sufficient. A higher limits endorsement can help ensure your firm is properly protected.
What Are “Higher Limits”?
Every legal malpractice policy includes limits of liability, which represent the maximum amount an insurer will pay on your behalf for defense costs and damages. These limits are commonly expressed as a per-claim limit and an aggregate limit—for example, $1 million / $1 million.
A higher limits endorsement increases these maximum amounts. For instance, a firm carrying $1M/$1M may choose to increase its limits to $2M/$2M, $5M/$5M, or more, depending on its risk profile. Higher limits do not change the scope of coverage but expand the financial protection available if a significant claim arises.
Why Higher Limits Matter
Legal malpractice claims have grown in both frequency and severity across many practice areas. Even a single claim—especially one involving complex litigation or real estate, business transactions, or estate planning—can exceed lower limit amounts. Choosing the right limit is essential to ensuring that a serious claim does not jeopardize the firm’s financial stability.
Higher limits may be particularly important if:
- Your matters involve high dollar values. Attorneys handling complex commercial deals, real estate closings, intellectual property matters, and high-net-worth estate planning face larger potential exposures.
- You regularly hold client funds or manage fiduciary responsibilities. Claims involving trust accounts or probate administration can result in significant damages.
- Your practice has grown. A firm that now represents larger clients, handles more matters, or serves as outside general counsel may have outgrown its original limits.
- You have expanded into riskier practice areas. Plaintiffs’ litigation, securities work, class actions, and certain corporate transactions can carry higher claim severity.
Factors to Consider When Evaluating Your Limits
When deciding whether higher limits are appropriate, consider the following:
- Typical dollar value of your cases or transactions
- Worst-case financial exposure if a client were to allege negligence
- Whether your clients or referral sources expect certain limit minimums
- Your firm’s growth, staffing, and case volume
- Past claims activity within your practice area
The Cost-Benefit Balance
Increasing limits does come with additional premium costs, but the added protection can be invaluable. In many cases, the cost of purchasing higher limits is minor compared to the financial and reputational consequences of an underinsured malpractice claim. For firms handling matters with substantial financial stakes, higher limits may effectively function as a form of long-term risk management.
A higher limits endorsement is more than just an optional upgrade—it’s a strategic decision that reflects the realities of your practice. As your firm grows and takes on more complex or higher-value matters, your liability protection should grow with it. Reviewing your limits annually helps ensure that you are adequately covered and that a single claim will not undermine years of hard work.
Questions? Contact Jared Burke for more information.