When speaking with law students and young lawyers about professional liability insurance and risk management, we always mention that we strongly encourage them to specialize. Why do we encourage them to specialize in a particular area of the law? The answer has to do with risk management.
Studies have shown that attorneys who are specialists are less likely than generalists to make a mistake that leads to a malpractice claim. This not only makes sense intuitively, but it is also backed by empirical data. CNA, the largest insurer of attorneys in the country, found that “nearly 70% of all business transactions claims are instituted against attorneys who reported that business transactions practice generated 5% or less of their annual revenues.”
The costs of being sued for malpractice – lost billable time defending the claim, expense of malpractice insurance deductible and a higher premium when you renew, stress, etc., – are so onerous, that attorneys will benefit greatly by reducing their malpractice risk. Specializing in a single area of practice (AOP) is a powerful risk reduction technique, because it enables an attorney to benefit from the “network effect” described above, and eliminates the risk of dabbling in practice areas that an attorney isn’t an expert in, while still producing income via referral fees for cases in other AOPs.