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Survey Shows Lawyer’s Malpractice Claims Are Up


Mergers, New Hires Have Boosted E&O Claims

Attorneys are increasingly finding themselves on the wrong end of a lawsuit as they face a rise in legal malpractice (errors and omissions) claims, according to recent findings in a survey of seven major global insurers. The participating insurers represent approximately 80% of the largest 250 law firms in the United States.

Five of the seven insurers, cites the survey, saw an uptick in law firm professional liability claims filed in 2012 than the previous year. Of that group, 40% indicated that frequency increased 21% or more, 20% reported an 11% to 20% increase, and 40% saw an increase of 6% to 10% in 2012 malpractice claims over 2011. In addition, the number of large claims is growing. Six of the seven insurance companies said they were seeing more claims that were expected to total more than $500,000, as well as a significant increase in claims in excess of $50 million.

Why the increase in claims?

Two significant trends – mergers and lateral hires – in the legal profession in recent years have boosted malpractice claims, the report indicates. Many law firms have sought either merger opportunities or hired attorneys from other firms in an effort to expand their business and develop new practice areas. But, along with these opportunities for growth and expansion comes an elevated risk of malpractice claims against the legal firms themselves due in part to divided loyalties (conflicts of interest) regarding whom the firm can and should represent. Among the insurers in the survey, 71% (five of the seven) indicated experiencing an increase in malpractice claims as a result of mergers and lateral hires. All five insurers experiencing claim increases cited new, lateral-hired attorneys – those who continue to work on clients of their former firms while employed at their new firm – as creating potential claim issues. Two insurers also indicated that new attorneys were not trained or supervised properly, and one insurer also traced issues to law firms not resolving potential conflicts of interest.

What’ more, the hiring trend among law firms is continuing, ironically, due in part because of a surge in litigation-related matters. In separate research conducted by Robert Half Legal, a staffing firm specializing in placing lawyers, paralegals and other highly skilled legal professionals, nearly one-third (31%) of interviewed lawyers said their law firm or company plans to expand or add new positions in the second half (July-December) of 2013. More than half (55%) of lawyers expect litigation activity to drive hiring at their law firms and companies, followed by business and commercial law matters, as cited by 39% of those polled.

The insurer survey also found that real estate lawyers were the most-targeted practice, followed by trust and estate lawyers who have seen an uptick in claims. One reason for the increased volume in real estate law practices could be the long lagtime. The big commercial real estate claims that appear to be driving the surge take longer to wind their way through the system than the small residential claims that hit in 2007, according to the survey.

Axis Insurance Services, LLC specializes in professional liability insurance, including providing errors and omissions coverage or legal malpractice insurance to attorneys. We work with a number of insurance carriers to tailor a policy specifically for the needs of this profession. Please give us a call at (877) 787-5258 for more information.

Sources: Wall Street Journal, Advisen, Robert Half Legal

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Blogged on: July 9, 2013 by Mike Smith
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