Building the 21st-Century Law Firm

Start financial protection before opening your law firm

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Jessica Youngblood

Photo of Jessica Youngblood courtesy of Knight, Morris & Reddick Law Group

One thing is certain in life and in business: No new journey or pursuit is devoid of risk. Risk, difficulty and unanticipated circumstance are almost a certainty in great personal and professional endeavors.

If you are thinking of starting your own law firm or have begun the process, you likely already have engaged in some form of risk-reward analysis and for unique reasons determined it might be the path for you. Maybe you have discovered you are an entrepreneur at heart; maybe you value being the master of your own calendar and time; or perhaps you have dreamed up an innovative and inclusive law firm culture and are daring greatly to set out and create it. Whether your purpose is practical, time-centered or more altruistic, it is a worthwhile personal and professional pursuit and one that, by design or not, simultaneously expands the reach of legal services to our communities.

But at the end of the day, a law firm is a business, and young businesses often fail when business owners fail to engage in risk management at the outset. Many businesses and business owners do not adequately consider or plan for unanticipated financial loss (or overspending). Despite doing all the right things otherwise, they quite simply run out of cash or capital to keep the firm or business going.

Risk management involves protection from certain unanticipated expenses while also having a source of funds available in the event of some type of financial loss. The latter might be addressed by a first step in risk management, self-insuring, which essentially means saving three months to one year of personal and business expenses before you start your practice. In reality, this is a difficult-to-impossible task for most.

Insurance, though, is an invaluable risk-management tool and one you should explore as you begin your practice. If you are starting out, it’s also a more cost-effective and realistic way to engage in risk management from the beginning.

Here are a handful of insurance tools you should consider heavily when starting your firm. Some are necessary at your firm’s inception, while others should simply remain on your mind and be explored further as your firm evolves.


Obtaining professional liability insurance, aka malpractice insurance, is not a thrilling task to think about while you are getting excited about the design of your firm website or the amazing new client software you just tested. It is, however, a basic risk-management tool a law firm should have in place before you begin practicing.

Professional liability insurance covers legal liability that arises from your delivery of legal services. It might not seem necessary at first, and some practitioners might think they are not at risk of a claim either because of the type of clients they serve or their practice area. But professional liability insurance, like most insurance, is a risk-management tool you might not think you need—until you do. It is the layer of liability protection most intimately tied to the practice you are working hard to build and the clients you are serving. As such, it should be considered an essential.

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How do you obtain professional liability insurance? If you are like me, you will ask a colleague or that friend of a friend who went solo. That process can bear fruit, but keep in mind that you will have many tasks in starting your practice. In general, it can be wise to outsource as many of those tasks as is practicable.

Using an insurance brokerage company is invaluable. It can compare rates for you and, perhaps most importantly if you are starting out, the company will be in the know on specialty rates given for new attorneys in their first year or two of practice. Most state bar associations can provide a recommendation on a brokerage company.

A final note on malpractice insurance: Some types of insurance are required by law—automobile insurance, for example. Professional liability insurance might or might not be required by your state bar. But in most states, such as California, attorneys are at least required to inform a client in writing at the time of engagement whether the attorney carries a policy.


You cannot be your best self and the best advocate for your clients if you are not healthy. Healthy means taking care of yourself mentally and physically. But it also means having peace of mind that you have access to quality, affordable health care should you become sick.

Health insurance is a sizable expense for almost anyone, and when you first start your practice, cash flow might be your principal hurdle. Speaking from recent experience, I can tell you it is worth prioritizing.

Having quality health insurance in place can set your mind at ease, and knowing you will be cared for if you become sick will free your professional brain space.

As a risk-management tool, a health insurance policy removes some uncertainty for potential expenses in that you will likely have some idea of the maximum you will pay out of pocket. Whether it’s a catastrophic plan or a PPO plan, a health insurance policy turns a potentially unexpected or unknown personal and business cost into an expense you can plan for based on the particulars of your policy.

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Jessica Youngblood is of counsel at the Knight, Morris & Reddick Law Group in its Los Angeles office. She specializes in comprehensive estate and trust planning.

This article appeared in the November 2017 issue of the ABA Journal with the headline “Playing Safer: Start protecting your firm financially before you open it.”

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