Every four years The American Bar Association’s Standing Committee on Lawyers’ Professional Liability does a study to determine which areas of law caused the most claims in the United States. The ABA will be releasing a new study very soon, but for now let’s take a look at some of the trends from the last two studies that cover the periods from 2007 – 2011 and 2012 – 2015:
2011 Study Number of Claims By Area of Law:
In the 2011 study, Real Estate took the number one spot for the first time ever. Since the beginning of these studies in 1985, Personal Injury-Plaintiff has held the #1 spot for the most claims by area of practice. Due to the change in the market though, Real Estate jumped past Personal-Injury-Plaintiff in the 2011 study to take the #1 spot.
Real Estate has been very interesting to watch, as it has been on a continuous down-slope for years. Starting at 23.36% in 2008, it has dropped nearly in half to 13.44% in 2014 (only slightly increasing to 14.33% in 2015).
2015 Study Number of Claims By Area of Law:
In contrast to Personal Injury-Plaintiff, Estate, Trust, Probate has been climbing dramatically over the years, growing from 10.11% in 2008 to 12.73% in 2015. Included in this rise is Family Law and Collections and Bankruptcy. All very close in rank, each of the three catergories are at an all time high since the studies began. It will be very interesting to see what happens in the next study, as family law is very close to taking spot #2.
The next study “Profile of Legal Malpractice Claims” is due to come out in 2019, so check back in with us to see what’s changed in the marketing from the past few years.
The areas of practice portion of your application is necessary to allow the underwriter to determine whether to insure the risk your firm presents to the carrier, and it also serves as part of the metric in determining the premium. Essentially, each practice area is assigned a ‘risk factor’. The more hazardous areas of practice will have a higher risk factor. The carriers determine ‘hazardous’ areas of practice by analyzing their loss experience for each specific area of practice.
It’s also important to be aware of how the carrier is asking for the areas of practice, whether it’s for the past 12 months, the last fiscal year, or based on hours worked versus billable hours/gross revenue.
These can change over time depending on a carrier’s past claim experience but currently, a few are plaintiff personal injury, medical malpractice, class action/mass tort, securities, entertainment, environmental, estate/trust/probate/wills, intellectual property, real estate, and corporate tax law.
Many factors can determine your annual premium, and rates may differ between carriers.
Some key premium factors are:
Price vs. Value: Making Informed Choices When Shopping for Lawyers Professional Liability Insurance
The amount of professional liability insurance coverage you should have depends on many different variables. The number of cases you take on each year, as well as the size and monetary value of the cases you are working on, will factor into how much coverage your firm will need. Other factors, including your location, the number of employees you have, the areas of practice you work in, and the limits of liability and deductibles, will also need to be taken into account.
How much insurance coverage you need will also depend on what limits of liability are appropriate. Your limits of liability will be offered in two ways:
It is important to keep in mind how quickly defense costs can erode your limits, possibly leaving you with little to no coverage for indemnification. Choosing the correct limits of liability is a very important decision. If a claim arises, even if it is baseless, increasing your limits after this occurs may not be an option.
The best way to look at it is like this: if you were to make an error and be sued by one of your clients, what would it cost you to defend (billable hours to a defense attorney) and indemnify (monetary judgment or settlement)?
Key Questions To Ask When Shopping For Professional Liability Insurance
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AI can help attorneys research malpractice insurance, compare policies, and prepare questions, but it shouldn’t make coverage decisions alone. This article highlights AI's useful roles, limitations, and the importance of human guidance when choosing Lawyers Professional Liability Insurance.
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