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AUGUST, 2010

What’s up in New York State?  Is there something in the water?  Why are so many insurance companies so anxious to write New York lawyers professional liability (“LPL”) insurance?   No kidding, just this year – so far – about a half dozen carriers have either entered the New York market, or have filings awaiting approval by the NYS Insurance Dept.

To my knowledge, only a single, small, non-admitted carrier has withdrawn a program from the state, though that same carrier is in the process of acquiring another, licensed and admitted carrier which have an active LPL program. 

In fairness, I should also point out that a couple of major insurers have instituted significant rate increases, which can only indicate that they have not found New York to be terribly profitable.  Of course, there is an old saying in the insurance industry, “There’s no such thing as a bad risk; only insufficient premium!”  One of these national carriers has been underpriced for years, and while this makes it easy to grow top-line revenues, it inevitably leads to bottom-line losses.

So, back to my original question:  What is it about New York State that makes it appear to be the Holy Grail for legal malpractice insurers?  True, there are a lot of attorneys throughout the state, which means that there are plenty of opportunities to write business.  However, I am not aware that the overall number of attorneys is growing, so each opportunity to write new business means that it is probably taking that business away from another insurer.  Also, while New York’s litigation environment for legal malpractice defendants is far better than, say, New Jersey, it’s no cakewalk.

Of course, the law of supply-and-demand inevitably means that with all of the market capacity competing for business, obtaining adequate pricing becomes a key issue.  Indeed, it is tempting for insureds to look only at pricing, but the reality for any knowledgeable insurance buyer is that market stability is important.  It is not in anyone’s benefit over the long term to have carriers come into any market, underprice a risk that they may not entirely understand, and then run-for-the-doors when the losses roll in.

The key challenge for insurance brokers – particularly those who specialize in placing legal malpractice insurance, as we do at Earhart Leigh Associates – is to assist our clients in navigating the tricky waters of a crowded market.  This means doubling our efforts to stay on top of market developments, monitoring rumors (some of which turn out to be true), evaluating policy forms, and maintaining on ongoing dialogue with underwriters.  This is, after all, how we demonstrate to our clients the true, long-term value of working with a specialty insurance broker!

If you have thoughts or comments, please let me know, bswicker@earhartleigh.com.