By Chiara LaPLume, Esq. and Terence J. Welsh, CPU, AIS
A 2023 study by Hiscox, suggests that 75% of small business in the United States are under-insured, and that, following a loss, 20% of small business will fail within the first year and 48% within five years. Below are other types of insurance that you should consider:
General Business Liability: While this is not required to practice law, it may very well be required if you sign a lease or sublease. Commercial General Liability (CGL) is usually not as expensive as professional liability insurance and can cover anything from a client’s slip and fall while in your office, to property damage if your malfunctioning copier sets fire to the building, to replacement of your office equipment if a meteor hits your office – to name a few. Policies can be tailored to add coverage for certain events, such as cyber-attacks and business interruption. Some of those covered events can require riders to the CGL policy, while others might be treated as supplemental (separate) policies.
Non-Owned and Hired Insurance. This is a must coverage for any firm that has employees or principals using their personal cars for firm business. It is usually added to the CGL or Business Owners Policy for a nominal amount and protects the individual driver for liability for an accident while on firm business. Liability coverage for an at fault accident using a car for “business” is usually not covered under a personal auto policy. Therefore, purchasing this coverage will protect yourself and any staff for an uncovered claim.
Wire Fraud and Cyber Risk Insurance: While some general business liability policies may cover certain losses from wire fraud involving client or law firm funds, most instances would not be covered depending on the cause of the fraud and would require a separate policy. Wire fraud, also known as social engineering or phishing, is often addressed in cyber security insurance policies. Some lawyers’ professional liability policies provide wire fraud or social engineering for “client funds” at various limits. You should carefully review cyber insurance policies to determine whether they cover wire fraud and if so, how much do they cover. You can learn more about cyber insurance policies by watching LCL’s Webinar for Busy Lawyers Cyber Risk Insurance for Lawyers: Should I Get It & What’s in It?, featuring malpractice insurance expert, Terence J. Welsh, CPCU, AIS. Some cyber risk insurance polices could require that you take certain preventative measures to guard against cyber-attacks.
Workers’ Compensation Insurance: Employers are required to carry insurance for all of their employees. Office work is not usually considered hazardous, so the cost is not usually significant. While a business does not need to obtain worker’s compensation insurance for independent contractors or partners, if there is a dispute as to whether the worker is miscategorized, it can lead to a long dispute period. Please note: if you are a solo practitioner and set up a corporation, you are considered an employee and should have worker’s compensation insurance coverage for yourself. You may be able to obtain an exemption from this requirement with your agent’s assistance. By contrast, a solo practitioner creating an LLC is presumed to not be an employee of the LLC, and worker’s compensation insurance coverage for yourself will not be required.
Flood Insurance: If your office is located in a flood zone, do not assume that the water damage caused by a flood to your business will be covered by the CGL insurance. Under these circumstances, you may want to explore flood insurance. If you lease space in a building located in a floodplain, make sure your landlord has secured flood coverage.
Health and Dental Insurance: While health insurance is not required or offered by many small businesses, offering health insurance as a benefit can be a helpful recruitment tool. The Supreme Judicial Court Standing Committee on Lawyer Well-Being has partnered with the Massachusetts Health Connector for Business to offer a resource to simplify and customize access to health and dental insurance. Solo practitioners and any small to mid-size firm (50 employees or fewer) that have an office in Massachusetts can access this resource, which includes potential rebates and credits. You can learn more about this resource at https://lawyerwellbeingma.org/health-insurance.
