Legal Malpractice Insurers’ Survey Shows Claims Increasing in Value and Defense Costs on the Rise

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Josh_Liebman Jan 2014 web res
Josh Liebman

By Joshua E. Liebman, Co-Editor

Ames & Gough (“A&G”) recently published the results of its fifth annual legal malpractice insurer survey. After surveying nine insurance companies that write Lawyer’s Professional Liability Insurance coverage regarding 2014 claims, A&G purports to identify: (a) the types of issues most likely to trigger malpractice claims; and (b) practice areas with the most significant claims activity. In addition, A&G’s report discusses risks that have been receiving greater scrutiny, such as those related to lateral hires and cyber security. The report also analyzes the cost of defending claims including rates paid to defense attorneys. Following is a brief summary of the survey results.

1. The frequency of legal malpractice claims remained constant in 2014. A&G concluded that the number of malpractice claims brought against law firms was flat on a year-over-year basis.

2. The dollar value of legal malpractice claims increased. Six of the nine insurers surveyed reported having more claims with reserves of $500,000 or greater in 2014 than in 2013. Six of the insurers reported claims of $20 million or more including three reporting claims of $50-$100 million and one reporting a claim exceeding $100 million.

3. Trusts and estates related claims increased while real estate related claims decreased. A majority of the insurers identified Trusts & Estates as the practice area with the most legal malpractice claims in 2014. In 2013, Real Estate led the pack. However, in 2014, Real Estate dropped to fourth with Corporate Business Organizations & Securities and Business Transactions-Commercial Law following Trusts & Estates as the three practice areas with the most claims.

4. Conflict of interest was the most frequently alleged malpractice error. Six insurers reported conflict of interest claims arising out of lateral hires or merging law firms.

5. Cyber-related malpractice claims are rising. Two insurers reported claims relating to network security events and stolen laptop computers.

6. Legal malpractice defense costs and rates paid to defense attorneys are on the rise. All nine insurers reported that the cost to defend malpractice suits increased in 2014. The cause appears to be a combination of larger and more complex claims and increased rates paid to defense counsel. Four insurers reported average hourly rates of $251-$300 while no insurers reported average rates less than $251. On the other end of the spectrum, only two insurers reported average hourly rates of $501 or greater.

(This is for informational purposes and is not legal advice.)

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