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Legal malpractice claim severity increasing: Broker survey

legal malpractice

Legal malpractice insurers are seeing a host of “ominous” developments involving claims, most significantly an increase in claim severity, says a broker survey.

There were also increases in legal malpractice claim defense costs, according to the report issued Thursday by McLean, Virginia-based Ames & Gough, which is based on a survey of 11 leading companies that write the business. The survey was conducted by email during the second quarter.

“While it isn’t easy to discern any single factor as the direct cause of this uptick, most insurers point to the increased complexity of business transactions and litigation matters as prelude to rising claims costs,” said the ninth annual survey report LPLI 2019 Claims Survey: Law Firms Wrestle with Higher Malpractice Claim Severity, Costs, Uptick in Frequency.

The survey found that for the first time in a few years, the number of new malpractice claims brought against law firms appeared to increase slightly on a year over year basis, with nearly 73% of insurers surveyed indicating the number of claims filed in 2018 were either the same as, or higher than, in 2017.

The survey said legal malpractice claims severity persists, with most insurers seeing individual claim payouts exceeding $150 million. The largest number of claims continues to stem from four key practice areas: business transactions, trust and estates, corporate and securities, and real estate, according to the report.

Ten of the 11 insurers surveyed indicated defense cost increased in 2018 over 2017, with 63% also reporting that defense counsels’ hourly rates increased again in 2018.

The report said conflicts of interest continues as the most frequent alleged malpractice error, with seven of the 11 insurers surveyed citing them as either the first or second leading cause of legal malpractice claims.

Meanwhile, cyber claims filed under lawyer’s professional lability policies remain flat as more firms purchase stand-alone cyber liability insurance, according to the report. The survey found, however, more claims that include alleged violations of the Rules of Professional Conduct.

Last year’s survey found that claim frequency stabilized in 2017, but claims severity continued to increase.




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