Most law firms are familiar with the concept of insurance, if for no other reason than because of the issues involved with carrying professional liability insurance in the event of malpractice litigation.

However, familiarity does not equate to coverage. The least costly annual malpractice insurance premiums range from $4,000 to $7,000 per experienced lawyer, often well beyond the ability of small firms and sole practitioners to purchase. (In some instances, a new lawyer is given a lower premium because he lacks "prior acts.")

In my home state of California, the state bar seeks to mandate public disclosure of lawyers who do not carry malpractice insurance. The implication is that they're bad apples; the truth is that they can't get affordable coverage.

Of course, bad apples do exist. For example, Massachusetts has followed similar actions by Connecticut and Rhode Island, requiring insurance carriers to send a notice to consumers whenever the carriers pay $5,000 or more to an attorney to settle clients' claims.

Some lawyers apparently seek to resolve clients' claims without the consent of their clients and, upon receiving payment from the defendant or defendant's insurance carrier, forge an endorsement of the settlement check and deposit the funds into their own accounts.

The new rules are meant to protect the public, but real protection will come from giving CLE practice management education, providing affordable malpractice insurance, and then requiring every lawyer to have both.

Lawyers face other ethical dimensions of insurance issues. Consider that the responsibility to protect and preserve client property and files requires precautions against the likelihood of harm to those materials.

Fire is an ever-present risk. If you are a lawyer in leased office space, are you or your landlord responsible for obtaining fire insurance?

How about specialized coverage for earthquakes, floods and hurricanes? Is client property covered? Do you have a complete inventory of the client property you maintain? Do you know the value of the client property and files in order to effectively insure them?

If you can't answer these questions affirmatively, it would be wise to call your carrier and make sure your policy provides the necessary protection.

Ethical concerns about insurance extend even further. The ethical duties of a lawyer to serve clients are paramount, and some authorities hold that failing to reasonably anticipate and be prepared to service clients in the wake of a disaster is a failure to act competently.

Even if you carry property, general liability and fidelity insurance to cover loss to facilities and equipment, business interruption coverage may be an option to consider. Such policies cover the business side of your law practice when it is interrupted by a disaster that drastically reduces or even eliminates current revenues.

It can be provided as part of your general property insurance or as a specialized product. Coverage is designed to replace income that would otherwise have been earned by the business had no loss occurred and is intended to allow the firm to remain in business — and to continue serving clients — even in the event of a major disaster.