“U.S. Legal Insurers Report All-time High Claim Costs: Survey” —

• “Legal insurers in the U.S. need to do more to contain the spiraling cost of malpractice claims as unprecedented claim costs reach an all-time high. That’s according to lawyer and liability specialist Eileen Garczynski, an SVP and equity partner at specialty insurance brokerage and risk management consultancy Ames & Gough.”
• “Speaking to P&C Specialist Commercial following the release of Ames & Gough’s 14th annual legal malpractice claims study this week, Garczynski said that the costs of claims were ‘out of control.'”
• “‘Lawyers are charging more, and the underlying deals are bigger. The bigger the deals are, the bigger the clams become,’ Garczynski said, adding that the costs of defending cases have ‘gone way up.'”
• “Ames & Gough’s survey, which canvassed 13 U.S. legal insurers that collectively insure 85% of the country’s largest law firms, found that 11 had paid out on claims totaling more than $100 million during the past two years.”
• “Five insurers had paid out on a legal malpractice claim worth $150 million to $300 million, and four had paid a claim topping $300 million.”
• “Those numbers were up sharply from last year, when seven of 10 survey participants had paid out on a claim of more than $50 million during the previous two years, three had paid out more than $100 million, and two had paid $150 million to $300 million.”
• “The survey found that although the rate at which claims are filed had remained flat, their value had soared amid social inflation – a rise in claims costs exceeding the level of economic inflation – which nine of the 13 insurers identified as contributing to the risk of large claim payouts.”
• “When it came to the types of cases generating the biggest claim payouts, most of the respondent insurers pointed to conflicts, which were their No. 1 source of legal malpractice claims, and drafting errors, which ranked second.”
• “‘Conflicts of interest produce a disquieting number of legal malpractice claims as well as ethics complaints and law firm disqualifications,’ the survey report said, noting that such conflicts had serious consequences as law firms sued for conflicts would also be sued for breaching their fiduciary duty to their clients.”
• “The survey found that the largest number of claims stemmed from the same key practice areas as had been the case during the past several years: trusts and estates, business transactions, and corporate and securities activity.”
• “Nine of the 13 insurers polled said they were seeing an increase in cyber-related legal malpractice claims.”
• “‘They’re very worried about that,’ Garczynski said. ‘Almost all the underwriters said that the cyber risks are hitting their legal malpractice insurance policies, because a lot of law firms don’t have enough cyber coverage in place, or they don’t have IT personnel that have enough expertise in cyber compared to other industries – yet they have a larger duty to protect client information than maybe any other industry.'”

In Texas: “Opinion 701 (May 2024)” —

• “Do the Texas Disciplinary Rules of Professional Conduct permit a lawyer to offer legal services under a subscription service fee model in which the client pays a monthly fee for legal services that the client may or may not utilize?”
• “If the Rules permit such an arrangement, must the lawyer keep the fees paid by the client in the lawyer’s trust account until the end of each month and make an appropriate refund upon termination?”
• “Under the Texas Disciplinary Rules of Professional Conduct, a lawyer may enter into a subscription fee agreement with a client, and charge and collect a subscription fee under that agreement, if the fee is not unconscionable under the circumstances. A lawyer should ordinarily retain subscription legal fees in the lawyer’s trust account until the end of the recurring subscription period.”
• “A contract provision forfeiting the entire amount of a monthly subscription fee if the subscription is cancelled before the end of the month is impermissible.”