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Lawyers Professional Liability: Claims Volume Flat, But Severity Up


Lawyers Professional Liability: Claims Volume Flat, But Severity UpLawyers Professional Liability: Claims Volume Flat, But Severity Up

A recent 2012 study of leading insurers that write professional liability insurance for attorneys reflects some good and bad news when it comes to claims. The good news is that claims volume for this year isn’t growing. In fact, for the majority of the insurers participating in the survey the number of new claims against attorneys filed in 2012 is flat compared to last year. The bad news, however, is that that the number of large claims has risen sharply.

Nearly all the insurers in the study have seen an increase in the number of claims with a reserve (including loss and expenses) of more than $500,000 in 2012. In fact, two of the six estimated the number has risen by more than 21% since last year; two experienced an increase between 11 – 20%, and another sees a 6 – 10% increase.

What’s more, many of these claims are from the 2009 and 2010 policy years — in the wake of the economic recession. Claims against lawyers, according to the study, can be a lagging indicator of the state of the economy. When a recession hits, insurance companies expect to see an increase in both frequency and severity of claims against lawyers in the following years. No increase in the number of claims may be an indicator that the U.S. economy is stabilizing.

The increase in the severity of the claims can be due to the number of the transactions or of the underlying matters law firms are working on. Based on the $500,000 or greater yardstick, increased defense costs can also play a role. The bottom line: Per claim indemnity and defense costs are on the rise.

The study also shows that the majority of the legal malpractice claims come from the real estate sector, which is consistent with 2011 findings. However, these types of claims have begun to level off, another possible indicator that the real estate market might be on the cusp of a post-recession rebound, says the study.

Making Sure You Are Covered

It’s critical that proper professional liability (errors and omissions) insurance is secured to respond to claims against attorneys, in addition to having key risk management controls in place to help prevent claims. Axis Insurance Services, LLC specializes in errors & omissions insurance for lawyers and can provide you with the insurance plan you need to protect against the financial costs of defending yourself or your firm. Please give us a call at: (877) 787-5258 to discuss your Lawyers Professional Liability needs.

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Blogged on: August 21, 2012 by Mike Smith
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