In 2011 the legal market saw a dramatic 10 percent rise in the number of malpractice claims brought nationwide, according to broker and risk management consulting firm Ames & Gough. The rise in claims reported in its annual survey was also reported in a recent study by the American Bar Association covering 2008 through 2011, and both organizations blame the recession. In 2012, though, that trend seems to have leveled off, Ames & Gough reports.
Despite this news of a slowdown, lawyers' professional liability program manager Dan McKenna says he still sees the claims rolling in.
"I get the sense [in California] that more claims are being filed against attorneys," says McKenna of the Mitchell & Mitchell Insurance Agency. "At least a couple of carriers have stopped writing lawyers' professional liability here, and another carrier has reduced limits being offered by firms in the southern part of our state while also increasing rates. [Some carriers] have had to add staff to their claims departments."
Another portion of the latest Ames & Gough report states that regardless of overall claim volume, the number of high-dollar claims has increased markedly, which could pose a potentially costly challenge for law firms. Specifically, the insurers surveyed saw more claims with a reserve (including loss and expenses) of more than $500,000 in 2012. Two of the insurers polled estimated an increase of more than 20 percent in claims of this size.
At Long & Levit in San Francisco, professional liability lawyers Kathleen Ewins and Jessica MacGregor say they've noticed a similar trend in claims they've handled recently - most of which are related to real estate, failed investments, or patent issues. "We're seeing an increase in the higher value cases because they typically emanate from business deals or litigation gone bad," says Ewins. "Those suing are trying to recoup money lost in a poor economy, and their lawyers get swept up in it."
MacGregor adds that for lawyers presently looking to obtain or switch insurance, the ability to select defense counsel is an important consideration. "If an attorney or a firm is able to negotiate or obtain in their policy a right to select counsel, that's something that we would advocate," she says. "It's worth asking for."
Underwriters, for their part, expect potential rate increases this year, but say first-rate insurance remains a must. "There is still a large amount of capacity in the market making rates affordable, even if they are increasing some," McKenna says. "It's hard enough for an attorney to run a profitable firm these days. Better to pay the premium for coverage than to incur a malpractice claim without an insurance company to stand behind you."
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