“For professionals like attorneys, CPAs, physicians, financial advisors, and other consultants, understanding their professional liability insurance is not just a matter of policy. It is a crucial aspect of their career and financial security. However, amidst their dedication to serving others, these professionals often overlook the full extent of their insurance coverage.”

Vlad Federmesser provides commentary on what attorneys, CPAs, physicians, financial advisors and other professionals should look for when buying professional liability insurance, from carrier strength and how “professional services” are defined to coverage limits, consent to settle clauses, and retro dates.

 

Vlad is an independent Insurance consultant and broker at E&Y Insurance Agency in Bloomfield Hills, Michigan. With more than 20 years of experience, he helps entrepreneurial individuals, physicians, and high earners protect, grow, and pass on their wealth through comprehensive insurance strategies. His areas of focus are professional liability, life insurance, disability insurance, and long-term care. Vlad’s e-mail address is vlad@eandyagency.com.

 

Here is his commentary:

 

EXECUTIVE SUMMARY:

For professionals like attorneys, CPAs, physicians, financial advisors, and other consultants, understanding their professional liability insurance is not just a matter of policy. It is a crucial aspect of their career and financial security. However, amidst their dedication to serving others, these professionals often overlook the full extent of their insurance coverage.

COMMENT:

The risk is not theoretical. According to the American Medical Association, 31.2% of physicians report having been sued at some point in their careers, and by age 55 that figure climbs to nearly half (46.8%).¹ Attorneys face a parallel exposure through the disciplinary system: in 2018 alone, state disciplinary agencies received 83,073 complaints against lawyers in 45 states and the District of Columbia.² Yet coverage is far from universal. Only Oregon and Idaho require private-practice attorneys to carry malpractice insurance; roughly 80% to 94% of private practitioners are insured depending on the state, and in some states more than 40% of solo practitioners practice without coverage.³

While professionals are committed to serving their clients and honing their expertise, it is equally important that they understand the nuances of professional liability insurance. This balance ensures that they are adequately protected and can continue serving their clients effectively. However, identifying a trustworthy specialist in the professional liability space can be challenging, making it essential to grasp some key factors when purchasing insurance.

Qualifying the Insurance Carrier: The most crucial factor in the selection process is choosing a financially strong, creditworthy insurance carrier. Remember, insurance is a contract; it is only as strong as the one guaranteeing it. Look for an A or A+ AM Best, or AAA, AA Fitch-rated carrier that has been in business for a significant period, with a specialized focus on protecting professionals in the area of expertise. This choice will give the professional a sense of security and confidence in their coverage. For example, some carriers may include Coverys, MedPro, The Doctors Company, and Pro Assurance. At the same time, for attorneys, it may be CNA, Liberty Mutual, Chubb, and AXA XL, among others. Most specialized, high-quality carriers will have a minimum of a 90% success rate pre-trial and in-trial; this is something the broker can inquire about on a carrier-by-carrier basis. Lastly, it is key to understand which states the insurance provider operates. Even if the plan is to practice in just one area for now, knowing the carrier’s reach is crucial should the practice expand later, or a significant opportunity presents itself.

That benchmark is consistent with what the national data shows when strong defense is in place. The AMA found that 65% of medical liability claims closed between 2016 and 2018 were dropped, dismissed, or withdrawn, and of the roughly 6% decided by a trial verdict, 89% were won by the defendant physician.¹ On the legal side, the American Bar Association’s most recent Profile of Legal Malpractice Claims (2020–2023) found that 82% of claims resulted in no payment to the claimant.⁴ The catch is that defense costs have continued to climb even on claims that ultimately pay nothing, which is precisely why the quality of the carrier’s claims and defense operation matters as much as the premium. The Medical Professional Liability Association’s Data Sharing Project, which tracks more than 32,000 closed claims, put the average cost to defend a medical liability claim at $47,914 for 2017–2021, and more than $67,000 in neurology and psychiatry.⁵ In law, nearly two-thirds of the carriers in EPIC’s 2026 survey reported that their average cost to defend a claim now exceeds $100,000.⁶

Determine How “Professional Services” Are Defined: Seemingly innocuous, professional services differ from policy to policy, so you should review your policy to ascertain the exact language. This is important because how these terms are defined will, at least in part, determine the scope of the coverage afforded by the policy. One would want to ensure that whatever they do to provide services to clients falls within the definition.

Gaps most often appear at the edges of a practice, where services have grown beyond the firm’s traditional core. In the AICPA Professional Liability Insurance Program (underwritten by CNA), consulting engagements made up 9% of all claims asserted against CPA firms in 2021, a 50% jump in volume from the prior year. Documentation matters just as much as definition: more than half of the tax claims asserted in the program in 2024 involved a service with no engagement letter in place.⁷ Newer services raise the same question; in EPIC Insurance Brokers’ 2026 survey of lawyers’ professional liability carriers, seven of 13 insurers reported an increase in claims tied to the use of artificial intelligence.⁶

How Much Insurance Do I Need?

The liability limits a professional should carry depends on many factors, including specialty, the services offered, and the type and location of the practice, group, or entity. Generally, the higher the limit, the better, but that is not always feasible for everyone nor necessary for low-risk solo practitioners. However, higher-risk specialties such as trusts and estates attorneys, personal injury, securities and transactions, intellectual property attorneys, physicians such as neurosurgeons, OBGYN, and osteopathic surgeons, CPAs, and consultants working with high net worth, complex clients involved in sophisticated or risky planning and deals will need significantly higher limits of coverage. The aggregate limit becomes critical for these professionals, particularly as they progress in their careers and their potential claims-risk horizon expands. Ultimately, the exact amount of coverage chosen will depend on state laws, assets, potential financial exposure, practice size, risk tolerance, and the affordability of coverage. A general rule of thumb would be for solo practitioners to begin with a minimum of 1MM per occurrence and 3MM in the aggregate, and go up from there. Those with larger practice sizes, say 20-50, start at a higher interval of a minimum of 5MM per occurrence and 10MM aggregate.

The dollar value of an average claim shows why 1MM/3MM is a starting point rather than a ceiling. Across all healthcare specialties, the MPL Association’s Data Sharing Project found an average indemnity payment of $356,472 on paid claims closed from 2017 to 2021.⁵ Add the average $47,914 defense cost and a single paid claim runs roughly $400,000. Three such claims in a policy year would exceed a $1 million aggregate, which is why a 3MM aggregate matters as much as the per-claim limit. Lawyers face a similar squeeze: many legal malpractice policies are written with defense costs inside the limits, and ALPS notes that defense costs on a claim can often break $100,000.⁸ On a 1MM policy, that is 10% or more of the limit spent before a dollar is paid to the claimant.

Claims data helps explain why the higher-risk practice areas need more headroom. In the ABA’s 2020–2023 study, estates, trusts, and probate overtook every other area to become the leading source of legal malpractice claims at 13.58%, followed by real estate (13.19%), plaintiff personal injury (12.73%), and family law (10.02%).⁴ Severity has grown even faster than frequency. Nine of the 13 carriers in EPIC’s 2026 survey reported at least one claim exceeding $100 million over the prior two years, and all but one of the 15 nine-figure claims they reported stemmed from transactional work rather than litigation.⁶ Medicine shows the same pattern: according to The Doctors Company, the average of the 50 largest medical malpractice verdicts rose from $32 million in 2022 to $56 million in 2024.⁹ Among physicians, the specialties most exposed are OB/GYNs (62.4% have been sued) and general surgeons (59.3%).¹

The averages for these subgroups sit well above the all-specialty and all-practice figures. Neurosurgery is one of three medical specialties whose average indemnity payment exceeds $500,000 in the MPL Association data.⁵ In the Association’s review of 1,778 OB/GYN surgery claims closed between 2016 and 2018, paid claims averaged $459,469; cesarean section claims averaged $566,690 with $98,556 in defense costs, and manually assisted vaginal delivery claims averaged $597,989 with $69,729 in defense costs.¹⁰ One average cesarean claim, including defense, would use about two-thirds of a $1 million per-claim limit.

For attorneys, the largest losses cluster in the same transactional and planning work. Lockton’s 2025 review of 83 publicly reported legal malpractice settlements and verdicts over $20 million found an average of $47.4 million and a median of $34.5 million. More than a third of those cases arose from transactional or corporate work, followed by securities (17), commercial litigation (9), real estate (6), tax (4), intellectual property (4), and trusts and estates (3).¹¹

CPAs and financial professionals show the same split between frequency and severity. Tax work generates the most claims against CPA firms, but audit work produces the most severe ones. CNA’s review of claims where it paid $1,000,000 or more in indemnity over the past 20 years found that failure to detect embezzlement or fraud was a recurring driver. The AICPA program also identifies estate, gift, and trust tax returns, the work most tied to high-net-worth clients, as some of the most expensive claims tax practitioners face in both defense and indemnity.¹² For registered investment advisors, broker Golsan Scruggs reported that the number of paid E&O claims rose 213% in 2023 and the severity of paid claims rose 85%, driven by suitability complaints after the 2022 market slump.¹³

Practice size does not provide a safe harbor in either direction. Firms with five or fewer attorneys still account for the majority of legal malpractice claims, yet large firms of 500 or more lawyers grew to 11.10% of all claims in the latest ABA study, up from 4.62% in the prior edition.⁴ Among CPA firms in the AICPA program, 32% of 2023 claims involved firms with less than $600,000 in annual revenue, 43% involved firms between $600,000 and $10 million, and 25% involved firms above $10 million.⁷ The dollars at stake for mid-size and larger firms explain the 5MM/10MM starting point. In Ames & Gough’s 2022 survey of lawyers’ professional liability insurers, every carrier had claims reserved above $500,000, and nine of 11 had taken part in a claim payout of $20 million or more within the prior two years. Defense alone can be substantial. For 2021, two of those insurers reported average defense expenses above $500,000 per claim, five reported averages between $100,000 and $500,000, and four reported averages between $50,000 and $100,000.¹⁴

Also, look for a policy that includes board hearings and proceedings - these can last years and cost tens of thousands of dollars in costs and lost wages. $50,000 in coverage is a good place to start. Treat that figure as a floor rather than a target. Jeffrey Segal, MD, JD, of Medical Justice warns that a $50,000 rider “will be eaten up very quickly” in a contested board matter, and higher sublimits are worth pricing for professionals in high-complaint fields.¹⁵ Disciplinary exposure is far more common than discipline itself: of the tens of thousands of complaints filed against lawyers each year, only about one-quarter of one percent of licensed attorneys are publicly disciplined.² Most complaints are ultimately dismissed, but every one of them must still be answered, often with counsel.

Claims-Made vs. Occurrence-Based Coverage

The difference between a claims-made professional liability policy and an occurrence-based policy is when coverage is triggered and when incidents and claims occur. A claims-made policy provides coverage only if a claim is filed during the active policy period (or an extended reporting period, if applicable), regardless of when the incident occurred, provided it happened after the policy’s retroactive date. An occurrence-based policy, by contrast, covers incidents during the policy period, no matter when the claim is filed, including many years later. This fundamental distinction affects exposure to long-tail risks (claims that emerge well after the event) and shapes premium costs, renewal needs, and tail coverage considerations.

For example:

In a claims-made policy, a consultant advises a client in 2022 under a policy active that year. If sued in 2023, coverage applies only if the policy is renewed or tail coverage is bought; otherwise, no dice. Even though the advice was given in 2022, the key is when malpractice coverage is triggered, based on when the claim is made.

A surgeon operates in July 2022 under a 2022 policy for an occurrence-based policy. If sued in 2025, the 2022 policy covers it; no renewal is needed since the incident happened during its term. The malpractice coverage is triggered based on when the incident occurred.

While occurrence-based policies offer robust protection, they are significantly more expensive at the outset compared to claims-made policies. Claims-made policies cost at least 35% less than the cost of buying a claims-made policy with an unlimited tail against having occurrence coverage for the same period. This cost difference arises because insurers take on a longer-term liability with occurrence-based policies, covering potential claims indefinitely.

However, the added cost of occurrence-based policies is often justified by eliminating tail coverage costs and the reduced risk of gaps, especially for professions with long-tail liabilities. To put that in perspective, tail coverage for a claims-made medical malpractice policy is typically priced at about 200% of the expiring annual premium, so a physician paying $40,000 per year could face an $80,000 bill to secure tail coverage when leaving a practice.¹⁶

Consent to settle clause: This is one of our professional liability policy’s most overlooked yet important aspects. When comparing carriers and coverage offerings, you need to know whether you have the final say in how your claim is handled. This clause is not to be taken lightly. You want to make sure that you have a policy with a pure consent to settle guarantee, meaning the carrier must obtain your direct, written consent before they are allowed to settle any claim on your behalf. If you’re buying a policy without consent or with ambiguous consent language, including Hammer Clauses, you’re giving the insurance company control over how your case is managed. Claims can be settled even if you don’t agree to them, and you can end up with losses on your record and cases reported to the licensing and regulatory body for your profession. This is a key factor for your malpractice coverage that should not be overlooked.

Hammer clauses deserve particular attention because of how they shift costs. Under a typical “soft” hammer clause, if you decline a settlement the carrier recommends, you share in the costs that follow. With a 70/30 split, for example, the insurer pays 70% of the additional defense costs and you pay the remaining 30%, and a stricter clause can leave you responsible for everything above the rejected settlement amount.¹⁷

It is advisable to ask which defense firms the carrier works with, as top malpractice insurance providers typically partner with the best, specialized local firms. If you have a preferred defense attorney, check whether your policy allows you to request your chosen attorney; some carriers allow this level of customization.

Identify the “Retro Date”

The retro date, or retroactive date, is the earliest date from which the professional liability policy may cover claims, even if the incident occurred years ago but is claimed during the policy period. This applies only to claims-made policies; it will usually specify the date after which the alleged negligent act must have occurred. For example, the policy period may be 5/15/2008-5/15/2009, with a retro date of 1/1/2002. This means the claim would have to be made between 5/15/2008 and 5/15/2009, and the acts complained of must have occurred on or after 1/1/2002. If it did not, then it will not be covered. If possible, the “retro date” should extend back to the date you began practicing in your professional capacity, but at a minimum, cover the entire period of your work at your current firm/group. Switching insurance carriers is common, but it can expose professionals to coverage gaps if the retroactive coverage date of the new policy does not extend back to the date of or past the alleged act or omission. For instance, if an attorney switches carriers and the new policy has a retro date that coincides with its effective date, there is no coverage for acts or omissions before that date, creating a gap in coverage. To avoid such gaps, professionals can deploy two strategies:

Timing is one of the most frequent sources of claims, which makes retro date gaps especially costly. In the ABA’s 2020–2023 study, claims arising from the commencement of an action or proceeding accounted for 18.90% of all claims, claims alleging failure to timely commence an action rose 2.73%, and administrative errors now represent nearly 25% of all claims.⁴

Tail Coverage: Purchase tail coverage for the expiring policy, which extends the reporting period for claims made after the policy ends. This is common in malpractice insurance, which covers claims for past treatment or legal work, ensuring protection against lawsuits filed years later.

Prior Acts Endorsement: Obtain a prior acts endorsement with the new policy to extend coverage back to the old policy’s retro date, bridging the gap. This can often be a point of negotiation with the incumbent carrier.

Claims accumulate over the course of a career. Only 9.5% of physicians under age 40 have been sued, compared with 23.8% of those aged 40 to 54 and 46.8% of those 55 and older.¹ Given the long latency of claims in medicine and law, understanding and managing the retro date is vital for comprehensive protection against potential liabilities.

Board of Directors and Pro Bono Work

Malpractice or professional liability insurance protects attorneys and consultants against negligence claims arising from their professional work, such as legal advice or consulting services. However, it usually does not cover actions taken by board members, as these are seen as separate from their day-to-day professional duties: Pro bono services or solo volunteer legal work.

Personal and Commercial Umbrella: Professionals often wrongly assume that these Umbrella or Excess policies will sit above, extend, or enhance their professional liability insurance. However, they do not.

 

HOPE THIS HELPS YOU HELP OTHERS MAKE A POSITIVE DIFFERENCE!

 

 

Vlad Federmesser

 

CITE AS:

LISI Business Entities Newsletter #325 (October 14, 2026) at http://www.leimbergservices.com. Copyright © 2026 Leimberg Information Services, Inc. (LISI) Reproduction in Any Form or Forwarding to Any Person Prohibited - Without Express Permission. Our agreement with you does not allow you to use or upload content from LISI into any hardware, software, bot, or external application, including any use(s) for artificial intelligence technologies such as large language models, generative AI, machine learning or AI system. This newsletter is designed to provide accurate and authoritative information regarding the subject matter covered. It is provided with the understanding that LISI is not engaged in rendering legal, accounting, or other professional advice or services. If such advice is required, the services of a competent professional should be sought. Statements of fact or opinion are the responsibility of the authors and do not represent an opinion on the part of the officers or staff of LISI.

Sources

1. American Medical Association, Policy Research Perspectives: Medical Liability Claim Frequency Among U.S. Physicians (2023).

2. ABA Survey on Lawyer Discipline Systems (2018 data), as reported by Lawyers Mutual of North Carolina.

3. Georgetown Journal of Legal Ethics, “The Politics of Lawyer Regulation: The Case of Malpractice Insurance” (2020).

4. ABA Standing Committee on Lawyers’ Professional Liability, Profile of Legal Malpractice Claims 2020–2023 (2024), as summarized by ALPS Insurance and Minnesota Lawyer (2025).

5. Medical Professional Liability Association, Data Sharing Project, “Healthcare Specialties” (Inside Medical Liability, Winter 2024), closed claims 2017–2021.

6. EPIC Insurance Brokers, 16th Annual Lawyers Professional Liability Survey (2026), as summarized by Freeman Mathis & Gary and Law360 (May 2026).

7. Journal of Accountancy, “Malpractice claims in 2021 and future predictions” (August 2022); “Professional Liability Spotlight” (December 2024); “Blocking and tackling: Engagement letters for tax compliance services” (November 2025), citing CNA claims data for the AICPA Professional Liability Insurance Program.

8. ALPS, Guide to Purchasing Lawyers Malpractice Insurance.

9. American Medical Association, “Why medical malpractice awards are on the rise” (January 2026), citing The Doctors Company.

10. Medical Professional Liability Association, Data Sharing Project, “Obstetric/Gynecological Surgery Claims” (Inside Medical Liability, Q2 2021), closed claims 2016–2018.

11. Lockton, Doug Richmond and Andrew Ricke, “Mapping the Law Firm Liability Landscape” (June 2025), as summarized by Minnesota Lawyer (October 2025).

12. CNA, “Accountants Professional Liability Severity Drivers”; Journal of Accountancy, “Managing CPA liability in the Great Wealth Transfer” (May 2026); New Jersey CPA, “The Current State of Professional Liability Protection” (November 2024).

13. Golsan Scruggs, 2023 RIA claims data, as reported by InsuranceNewsNet (March 2024).

14. Ames & Gough, Lawyers Professional Liability Insurance Claims Survey (2022).

15. Jeffrey Segal, MD, JD, “Dealing with Medical Board Complaints: Part I,” Medical Justice (August 2022).

16. MEDPLI, “How much does tail coverage cost?”

17. Insurance Training Center, “The Hammer Clause.”