You have spent years building your practice, but what happens when you step away? For solo attorneys, retirement is not just about closing cases and notifying clients. It’s also about ensuring peace of mind, knowing that nothing from your past practice will come back to haunt you. This includes malpractice claims that could surface years after you stop practicing.
Unlike attorneys at law firms who may still have coverage under their former employer, solo practitioners must take responsibility for their own malpractice protection. Yes, even after they stop practicing. This is where tail coverage comes in.
If you’re thinking, “What’s tail coverage?” don’t worry. In this post, we’ll cover everything you need to know about it, including:
- What is tail coverage?
- Do all solo attorneys need tail coverage?
- What are the risks of not having tail coverage?
- How much does tail coverage cost, and is it worth it?
- Are there any ways to get tail coverage for free?
- How do you purchase tail coverage, and when is the deadline?
What Is Tail Coverage?
Tail coverage, officially known as an Extended Reporting Endorsement (ERE), is not a separate insurance policy but rather an extension of your last malpractice insurance policy. It may also be called “extended reporting period coverage” or “malpractice run-off coverage.” Tail coverage allows you to report claims that arise from work you performed while your policy was active, even if those claims are filed after you retire.
Why Solo Attorneys Need Tail Coverage
Unlike attorneys at firms, sole practitioners bear 100% of the risk for malpractice claims that arise after they retire. While law firm attorneys may be covered under their former employer’s malpractice policy, solo attorneys must take personal responsibility for any post-retirement claims.
Most legal malpractice policies only cover claims made and reported while the policy is active. Thus, there is no coverage if your policy expires and a claim is filed later. If an attorney allows their malpractice policy to lapse upon retirement, they lose coverage for any claims that arise later, even if the alleged malpractice occurred during their active practice. Let’s look at some scenarios that are best avoided.
Example 1: Estate Planning Mistake
An estate planning attorney drafts a will in 2022 and retires in 2026 without purchasing tail coverage. In 2028, the client dies, and the heirs discover a drafting error leading to a six-figure tax liability. They sue the attorney for malpractice, but without tail coverage, there is no insurance to cover the claim, even though the mistake happened while they were still practicing.
Example 2: Business Transaction Error
A solo attorney drafts a high-value partnership contract in 2023 and retires in 2027 without tail coverage. In 2029, a dispute arises when one party claims a key clause was missing. This leads to a lawsuit. The attorney is named in the suit, but with their policy expired, no coverage is available.
With tail coverage, both attorneys from the above scenarios would still be protected, even years after leaving the profession.
Why This Matters for Solo Attorneys
Even after you stop practicing, your past work remains a liability. Clients may discover errors months or even years after their work with you has concluded. Without tail coverage you could be personally responsible for legal fees, settlements, or judgments.
Certain practice areas carry a higher risk of delayed claims, such as:
- Estate planning: Errors may come to light after a client’s death.
- Business law: Clients may not realize they received faulty advice until they face tax consequences or contract disputes.
- Litigation: A missed deadline may not have an impact until a case is dismissed years later.
A single uncovered malpractice claim could result in tens or hundreds of thousands of dollars in legal fees or damages for a solo attorney. That means one malpractice claim could drain your savings and turn your retirement into a financial disaster. Do you want to spend your golden years fighting lawsuits instead of enjoying vacations?
How Much Does Tail Coverage Cost For Solo Lawyers? Is It Worth It?
The cost of tail coverage depends on several factors, including your insurance provider, policy limits, and practice area. On average, it costs 1.5 to 3 times your last annual malpractice premium as a one-time payment.
Cost Estimates
If your last annual premium was $4,000, then tail coverage could cost anywhere from $6,000 to $12,000 up front. If your annual premium was $6,000, tail coverage might cost between $9,000 and $18,000.
Factors That Affect Cost
- Policy Limits: Higher coverage limits lead to higher tail coverage costs.
- Duration of Tail Coverage: You can typically purchase 1-year, 3-year, 5-year, or unlimited coverage; the longer the coverage, the higher the cost.
- Practice Area: Some areas of law, such as estate planning and business law, have a higher risk of delayed claims, making tail coverage more expensive.
- Insurer Policies: Some companies charge more than others, so it is wise to compare options.
The cost of tail coverage is not insignificant, but the cost of not having it can be far greater—not only in terms of a potential judgment against you, but in the loss of peace of mind.
Can Solo Attorneys Get Tail Coverage for Free?
Some insurers offer free tail coverage under specific conditions. This is usually provided if:
- You have been insured with the same company for a set number of years (often five or more).
- You are retiring permanently and not planning to return to practice.
- You meet the age or career tenure requirements set by the insurer.
If you are close to retirement and considering switching insurance providers to save on annual premiums, check if your current insurer offers free tail coverage first. Switching too soon could cost you this benefit.
Purchasing Tail Coverage & Deadlines To Know About
Tail coverage is not an automatic feature of a malpractice insurance policy. You must actively purchase it before your policy expires. If you miss the deadline, you may lose the option entirely.
Steps to Purchase Tail Coverage
- Review Your Policy: Check if your insurer offers free tail coverage and confirm deadlines.
- Contact Your Insurer: Ask about costs, coverage limits, and duration options.
- Choose a Duration: Options typically range from one year to unlimited coverage.
- Make the Payment: Tail coverage requires a one-time lump sum payment.
- Get Confirmation: Ensure you receive written proof of coverage.
Plan ahead so you do not miss the short purchase window. Some insurers require paperwork before your policy expires, so do not wait until the last minute.
When to Purchase Tail Coverage
Most insurers only allow you to buy tail coverage within a limited time after your policy ends, typically within 30 days. Some policies have even shorter windows, requiring you to purchase it on the exact date of cancellation or expiration.
The Risks of Not Having Tail Coverage
Retiring without tail coverage is a gamble that could cost you everything. A single malpractice claim can lead to six-figure legal fees or settlements, forcing you to pay out of pocket. Without coverage, even your personal assets or estate could be at risk, turning what should be a peaceful retirement into a financial nightmare.
Ready to Retire? Make Sure You’re Covered
Retirement is not as simple as closing your doors and calling it a day. Tail coverage is just one of many crucial details that solo attorneys must address before stepping away from their practice. Without a clear plan, you could leave yourself and your family vulnerable to unexpected risks, financial burdens, and legal headaches long after you stop practicing.
Most attorneys do not realize how much they do not know about preparing for retirement. From protecting yourself against malpractice claims to ensuring your clients are taken care of, countless moving parts must be handled correctly. Missing even one step can be costly, but with the right guidance, you can confidently retire.
This is where Roy Ginsburg comes in. With years of experience helping attorneys transition out of practice, he knows what you need to do and what pitfalls to avoid. Book a call with Roy today to get expert help with your succession plan and make sure nothing is left to chance.
