Risk Update

Insurance Update (Part 2) — Insurer Survey in Greater Depth

Legal malpractice claims on the rise – study” —

  • “In its 10th annual survey of lawyers’ professional liability claims, the broker polled 10 leading lawyers’ professional liability insurers, which, on a combined basis, provide insurance to about 80% of AmLaw 100 firms. Ames & Gough found that the number of claims resulting in large multimillion-dollar payouts – as well as the dollar amounts involved – spiked for the second straight year. Most of the insurers surveyed had made a claim payout of more than $150 million in the past two years, and at least two settlements exceeded $250 million.”
  • “‘Yet, according to the survey, the actual large-claims experience may be worse than reported; due to the increased cost to defend claims, a number of matters settled quickly (to avoid the added expense) with the resulting claims above their primary layer of insurance,’ Ames & Gough said.”
  • “Every year, insurers surveyed in the study have cited conflict of interest (including perceived conflicts) as the most common alleged legal malpractice error. This year followed the trend, with five of the 10 insurers surveyed citing conflicts as either the first or second leading cause of legal malpractice claims.”
  • “‘Law firms should not underestimate the importance of conducting thorough conflict checks, as well as the need to have systems in place to flag and address any situation involving a potential conflict,’ Garczynski said. ‘This calls for an ongoing and robust internal process that goes well beyond conducting a conflict check upon accepting a new engagement or making a lateral hire.'”
  • “The cost of defending malpractice claims continued to climb, the survey found. Nine of the 10 insurers surveyed said that defense costs had increased in 2019. The rates insurers paid defense counsel also continued to rise, with 80% reporting an increase in rates paid to defense counsel during the past year.”