Login Register Subscribe
Current Issue

Law firm malpractice claims slow but still cost insurers millions: Survey


The frequency of law firm malpractice claims has started to level off following a post-recession surge, but their severity has continued to increase, according to a survey of major insurers by specialty broker Ames & Gough.

“In particular, the complexity and longer development pattern of the post-recession claims together with soaring defense costs led law firms to experience a significant uptick in malpractice claim severity in 2013,” said the fourth annual survey by the McLean, Virginia-based broker, which was conducted during this year's second quarter.

The survey covered eight malpractice insurers who insure more than 80% of the 100 biggest U.S. law firms. It found that six of the eight had more claims with reserves of $500,000 or greater, including loss and expenses, in 2013 than they did in 2012.

In addition, four of the eight insurers indicated their company had either paid or participated in paying a claim of $100 million or greater, while two others had a payment of between $50 million and $100 million.

Five of the eight insurers identified real estate as the practice area continuing to see the largest number of legal malpractice claims. Conflict of interest is the most common alleged legal malpractice error.

“When business deals go bad, clients often look to their lawyers for compensation,” said Eileen Garczynski, a partner and senior vice president at Ames & Gough, in a statement.

“To minimize their risk of related malpractice actions, law firms need to maintain a strong conflicts database and clearly identify who they're representing in a transaction. They should also avoid serving on their clients' corporate boards.”

The survey also found that four of the insurers had a claim arising from a cyber or network security event, including three who said the breach was the result of a lost or stolen laptop.

Last year's survey of a slightly different group of insurers found an increase in both frequency and severity.

Insurers participating in this year's survey were American International Group Inc. and its Lexington Insurance Co. unit; Richmond, Virginia-based Markel Corp.; Pembroke, Bermuda-based Axis Capital Holdings Ltd.; London-based Brit P.L.C.; Hamilton, Bermuda-based Catlin Group Ltd.; Chicago-based CNA Financial Corp.; Hamilton, Bermuda-based Ironshore Inc.; and Swiss Re Corporate Solutions, a unit of Swiss Re Ltd.

Free copies of the survey, “Lawyers' Professional Liability Claims Trends: 2014” may be obtained by emailing requests to info@amesgough.com.