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Bruce R. Swicker

11 to 25 Attorneys

Practices with 10-25 attorneys face significant insurance issues and risk management challenges. Many firms of this size have a broad, general practice. Others are highly specialized "boutique" practices, focusing all or a substantial portion of their efforts in a single area of the law.

Underwriters consider certain legal specialties to be potentially high-liability practice areas. These include:

Intellectual Property (patent, as well as trademark and copyright)
Securities
Personal Injury plaintiff representation
Entertainment
Debt Collection
Class Action

Claims statistics show that plaintiff personal injury representation is the leading cause of malpractice claims, accounting for one quarter of all claims. It often comes as a surprise that real estate runs a close second. Our Special Situations page has much more detail about high-liability practice specialties.

A firm of this size may have grown from a very small practice or from merging two or more smaller practices. In either case, practitioners may overlook the increased administrative requirements of the growing firm. Sometimes the members resist hiring an administrator or appointing a managing partner. This may be due to concern that this will diminish the collegiality that brought the firm’s attorneys together in the first place. This is perfectly understandable, but it can leave attorneys more vulnerable to malpractice claims.

We often see firms that simply "inherit" the insurance coverage from an acquired firm. In this case, the limits may be insufficient or the coverage may be inadequate for the existing firm. We also see cases where insurance issues have been totally ignored. As the firm's size increases and revenues grow, it is vitally important to review liability limits, retentions and deductibles. In addition, prior acts coverage for both the firm itself and its individual attorneys should be reviewed.

Here are some of the questions that need to be addressed from a risk- management standpoint:

How are “Of Counsel” relationships defined?
Is the firm leasing its office space from another firm?
Is the firm leasing some of its own excess space to other attorneys?

At ELA, we can work with you to evaluate and understand all of the challenges your firm is facing.

Latest updates; random thoughts . . .

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.

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