Risk Update

Insurance & Malpractice Matters (Spoiler Alert: Conflicts Count & Cost)

The folks at Ames & Gough have published their annual “Lawyers Professional Liability Insurers 9th Annual Claims Survey” —

  • “In it’s ninth annual survey of lawyers professional liability claims, Ames & Gough examined the trend by polling 11 of the leading lawyers’ professional liability insurance companies that on a combined basis provide insurance to approximately 80 percent of the AmLaw 200 firms.”
  • “The survey found the number of claims resulting in larger multimillion dollar payouts – as well as the dollar amounts involved – has surged in the past year; 2018 became the first year ever in which the majority of insurers surveyed had a claim payout of over $150 million. Furthermore, at least two settlements exceeded $250 million.”
  • Conflicts remain the biggest malpractice error. Year after year, the insurers surveyed have singled out conflict of interest (including perceived conflicts) as the most common alleged legal malpractice error. This year, seven of the 11 insurers surveyed cited conflicts either as the first or second leading cause of legal malpractice claims.”
  • “Conflicts are especially problematic as more law firms seize opportunities for growth and expansion either through mergers or by bringing in lateral hires. According to the survey, there are times when a lawyer who changed firms can contaminate the new firm with what he or she learned at the old firm.”
  • “‘To get control of this risk more firms are centralizing their conflicts of interest screening and managing the client intake process,’ Ms. Garczynski noted. ‘While that’s a step in the right direction, law firms still need to do a better job of flagging potential conflicts early and training their legal professionals on this issue. Firms unsure of how to properly screen a lawyer might consider working with an attorney who specializes in professional responsibility.'”

And for those who prefer to live on the edge: “Washington State Bar Decides Against Malpractice Insurance Mandate” —

  • “The Washington State Bar Association’s board recently rejected a recommendation that it require the state’s licensed lawyers to obtain malpractice insurance.”
  • “Washington’s decision last week came not long after the State Bar of California’s board also decided against moving forward with a malpractice mandate.”
  • “Oregon and Idaho remain the only two states with a malpractice requirement for attorneys.”
  • “While some board members agreed with mandate supporters that the percentage of uninsured lawyers was a consumer-protection issue, they suggested there were other ways of addressing the matter. One proposal was to examine the “South Dakota model.” In that state, lawyers who do not carry a minimum of $100,000 in insurance must disclose that information at the formation of the attorney-client relationship.”

It appears these issue are in the air, including in Georgia, where John Watkins from Thomson Hine opines on a proposed rule: “Malpractice Insurance Proposal May Require Changes in Current Insurance” —

  • “Proposed Rule 210(a) states: ‘All active members of the State Bar of Georgia engaged in the private practice of law in Georgia must be covered by a policy of professional liability insurance, in an amount no less than $100,000 per occurrence and $300,000 in the aggregate, the limits of which are not reduced by payment of attorney’s fees or claims expenses incurred by the insurer for the investigation, adjustment, defense, or appeal of a claim.'”
  • “There are many views pro and con about the State Bar’s proposed rule requiring lawyers have malpractice insurance. But there is a bigger problem with the proposed rule as written—if you have malpractice insurance, it almost certainly does not comply with the proposed rule and you probably cannot buy insurance that does.”
  • “Thus if a large law firm has a professional liability policy underwritten by Lloyd’s syndicates on a typical policy form with $100 million per claim/$100 million aggregate policy limits, it would not comply with the proposed rule because the limits are not “per occurrence” and defense costs erode limits. I am quite certain that this is not what the State Bar had in mind when it proposed the rule, but the law firm with the hypothetical policy (and its lawyers) would technically be in breach if the proposed language is adopted.”