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By: Gregory L. Blueford
Per a survey conducted by insurance broker Ames & Gough earlier this year, professional liability is becoming more and more expensive with big money payouts. In its 9th annual survey of top 11 professional liability insurance companies, Ames & Gough found that the number of claims resulting in multimillion dollar payouts increased from 2017 to 2018, with the majority stating that they had at least one claim payout of over $150 million and two had settlements which exceed $250 million.
The average cost to defend a malpractice claim, while varied amongst those insurance companies surveyed, increased from 2017 to 2018 for 10 of the 11 insurers surveyed. Two indicated the average cost to defend a claim exceeded $500,000; three stated their average defense costs were between $100,000 and $500,000, and the remaining six insurers all had an average cost between $50,000 – $100,000. 7 of 11 insurers said that the rates they are paying defense counsel to handle professional liability claims have risen from anywhere from 2 – 5%.
Further, conflicts of interest, including perceived conflicts, remain the most common alleged legal malpractice error, with 7 of the 11 insurers surveyed stating conflicts as one of their top two leading causes of legal malpractice claims. The largest number of claims stem from the following four practice areas: Business Transactions (cited by 63 percent of insurers surveyed), Trust and Estates (55 percent), Corporate & Securities (45 percent), and Real Estate (45 percent).
This survey demonstrates the importance of law firms ensuring that their conflict check system is functional and, most of all, practical in identifying potential conflicts, especially for large firms operating with multiple offices. Further, as stated in the survey, many attorneys handling business transaction matters often wander outside their area of expertise, as certain elements may appear quite different as the matter progresses. Thus, it is important for attorneys to make sure they are staying within their defined role for the particular matter they are working on and, if the issues stray outside that role, work with the client to bring in another attorney who has the necessary expertise.
The insurers participating in the Ames & Gough survey were: AXA XL, AXIS, Brit, CNA, Crum & Forster, Huntersure, Liberty, Markel, Sompo, Swiss Re, and Travelers.
You can read more about this survey or request a copy of the survey here.
If you have any questions or would like more information, please contact Greg Blueford at [email protected], or any other member of our Lawyers Professional Liability Practice Group, a list of which can be found at www.fmglaw.com.