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Posts Tagged ‘professional liability insurance’

Last week Nevada’s Supreme Court spared the state’s private practice lawyers from being forced to pay thousands of dollars in annual costs. The court unanimously denied an ill-considered state bar-sponsored rule petition to impose as a condition of licensure a requirement that all lawyers engaged in private practice buy professional liability insurance. The court ruled, “Having considered the petition and the comments from the State Bar and the public, we conclude that the Board of Governors has provided inadequate detail and support demonstrating that the proposed amendment to SCR 79 is appropriate.”

The Court also took particular note of its existing rule that already provides for public disclosure of whether an attorney maintains professional liability insurance.

Interestingly, in preparing its misguided rule change petition Nevada’s Board of Governors relied on data and input provided by an interested stakeholder and current market participant,“its endorsed lawyers’ malpractice insurance company and “the nation’s largest direct writer of lawyers” malpractice insurance.”

The high cost to practice.

As it is, most lawyers voluntarily carry legal malpractice insurance. But it’s one thing to do so by choice and quite another to do so by coercion. Nevada’s high court is to be saluted for its prudence in rejecting the Bar’s proposal, which would have catapulted Nevada into the uppermost ranks of the highest cost to practice jurisdictions in the U.S.

At least, for now, Oregon has the dubious distinction of remaining king of the high cost mountain.

But high cost contenders remain. Mandatory bar association leaders apparently love nothing more than finding new ways to scorch their members with new practice pains and greater financial burdens, especially for those in private practice. Indeed, as of the first of the this year, to keep their tickets to practice Idaho private practice lawyers are now required to submit “proof of current professional liability insurance coverage at the minimum limit of $100,000 per occurrence/$300,000 annual aggregate.”

That resolution passed in Idaho by a scant 51% to 49% vote of bar members. It’s unclear how many Idaho private practice lawyers voted or were even aware of the proposal. I suspect not many. Moreover, had the word gotten out in time as it barely did in Nevada, the outcome might have been much different.

Anecdotally, for example, in July I exchanged emails with a Nevada lawyer also licensed in Idaho. While objecting to the proposed Nevada insurance mandate, he expressed concern should Idaho follow with a similar requirement. He was floored to learn that not only had it already been considered in Idaho — but that even now he was subject to the new rule as of January 1, 2018!

No remedy.

Besides significantly increasing the cost to practice, mandatory professional liability insurance is no remedy for the victims of a lawyer’s intentional acts or omissions and criminal or fraudulent conduct. Why? Because these acts along with numerous others fall under common policy exclusions that too often foreclose relief to claimants. Insurers don’t cover intentional, criminal or fraudulent acts. In addition, mandatory insurance is not designed to protect the public — but to protect the insured. I discussed some of this in my “No lawyer love in Nevada” July blog post.

Finally, Washington lawyers in private practice should remain vigilant lest they be caught unaware like their next door neighbors. Mandatory bars are notorious copy cats. And the folks running the Washington Bar are particularly adept at giving it to their members.

File:Aprilmaze.jpg

For sometime now and as reported here, the Washington Bar has been considering its own legal malpractice insurance mandate. In July, the Association’s Mandatory Malpractice Insurance Task Force issued its interim report.

I doubt Nevada’s failure to afflict its lawyers with compulsory insurance will do much to dissuade the Washington Bar from its hard-nosed agenda.

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Credits: Aprilmaze.jpg, at Wikimedia Commons, public domain.

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Two years ago, I first blogged at “Opening My Kimono to get Lawyer Malpractice Insurance,” about the pitfalls and annoyances of obtaining lawyers malpractice insurance – – – a necessary evil.

I call the process a pas de deux except here, your dance partner keeps stepping on your toes. And as your ‘partner’ in this scenario is the malpractice insurance company, they’re constantly changing the entrée on you. Also see “Is the second shoe about to drop? Lawyer’s Malpractice Insurance.”

That time of the year . . . to bend over.

photoSo it’s renewal time again. To justify their ridiculously high malpractice insurance rates, once more lawyers are asked to take ‘on faith’ the stories agents tell them, e.g., that “claims are up” or that “all premiums are going up” or that “new areas are seeing more claims.” And mind you, it’s irrelevant whether or not you’ve had any claims, suits or bar discipline. You’ll pay more regardless. But, if any of those exceptions apply, well, then forget it, bend over.

Please believe me.

So this year, I heard again that Please Believe Me” nonsense. Without empirical data to speak of, or at least the sharing of facts with their customers, insurers expect the most cynical of professionals – – lawyers, to guilelessly accept their assertions concerning the supposed higher risk practice areas or jurisdictions.
Historically, insurers have contended that the ‘high priced spreads’ are, plaintiff’s personal injury, securities law, and of late, class actions. But earlier this month, one company shill told me “business/commercial transactions” were becoming higher risk. I guess they’ll soon have a rider for that, too.

Say what? At this rate, every practice area will be “hazardous.” For that matter, the only other supposed “highest frequency” practice area information I know of came 25 years ago when the ABA’s National Legal Malpractice Data Center released data on 30,000 claims nationwide. “Legal malpractice claims occur with the highest frequency in a few specific areas of law: personal injury plaintiff, 25.1%, real estate 23.3%; collection and bankruptcy, 10.5%; family law 7.9%; estate, trust, probate, 7%.” See “Board Issue Paper – Professional Liability Insurance Company.”

And then turning the concept of who the customer is on its pointy little head, one foggy-headed insurance broker blissfully blogged at, Lawyers Professional Liability Insurance – Why Does It Cost So Much?,“The first, and I believe the most important, consideration for law firms to consider when you complete your lawyers professional liability insurance applications is the attitude brought to the process; why are you doing this?

“The application is your opportunity to tell the story of your law firm; why should an underwriter want to insure you and why should they offer you the best pricing they have available?

Attitude? You want “attitude”? “Why should an underwriter want to insure you?” And“Why should they offer you the best pricing they have available?” Huh? Should lawyers gratefully get on all fours if an underwriter deigns to insure them? If that wasn’t so absurd, it might be laughably ridiculous.

But assuming the recession and flaccid business hasn’t forced a lawyer to go commando, i.e., “uncovered,” here are a few ‘Do’s and Don’ts’ on trolling for realistically competitive lawyer’s professional liability insurance.

1. Don’t get too comfortable by staying with one insurer. Shop early and every year. The Internet and ‘word of mouth’ are great search tools;

2. Don’t get complacent by staying with the same broker;

File:Henhouse near Ganthorpe - geograph.org.uk - 670026.jpg3. Avoid the ‘fox in the hen-house’ effect. Push back when a broker or insurance agent defines what’s “reasonable” or “competitive.” The easiest money to spend is somebody else’s money;

4. Don’t believe insurance company or broker “nonsense” about excessive claims in your jurisdiction. Each company has its own claims experience and another company may be much more competitive in the identical market. And besides, where’s the proof?;

 5. Don’t disclose your current premium cost. All the applications ask. But you don’t have to tell them. Opening your kimono only leads to being taken advantage of;

6. Carefully analyze your practice areas. Make sure you accurately reflect the correct percentages on the application;

7. Make sure comparisons are “apples to apples,” e.g., insurers with the same financial ratings, coverage limits, deductibles, defense coverages, admitted vs. non-admitted companies, etc.

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Photo Credits: Rob Bending Over Roof by Paul Waite pauldwaite via Creative Commons Attribution-ShareAlike License at Flickr;”Eek there’s a camera down there,” by David Long at Flickr via Creative Common-license requiring attribution;”01 (330)” by Victor1558 at Flickr via Creative Commons-license requiring attribution; Hen house by Phil Catterall at Wikipedia Commons via Creative Commons Attribution-ShareAlike 2.0 license.

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