Lawyers Professional Liability

Christopher Troisi, Zurich North America

Denise Olson, CNA Insurance

CARE

September 19, 2002

Rating

Major Rating Factors

• # of Attorneys / Size of Firm

• Step (# of Years Claims Made)

• Area of Practice (AOP)

• State

• Limits and Deductibles

• Coverage provisions

• Claims history

Size of Firm

Small Firm Characteristics

• 1 - 3 attorneys

• Tend toward Lower Risk AOPs

• Low Limits/Deductible

• Buying reputation protection

• Underlying risks smaller

• Stable partnerships or solo work

• Highest frequency / lowest severity

Midsize Firm Characteristics

• 4 - 15 attorneys

• Constantly changing partners

• AOP Spread is broad

• Mid range Limits/Deductible (1M - 3M)

• Need coverage for financial protection

• Lower frequency, but still very high / higher severity

Large Firm Characteristics

• 16 - 100 attorneys• Broad AOP split / some multiple locations• Higher Limits/Mid-range Deductibles -

changing• Underlying risk curve more severe• Constant change, but less impact at this size• Lower frequency / severity is more of an issue

Jumbo Firm Characteristics

• 100+ attorneys

• Broad AOP split / multi-location / some multi-national

• High Limits/SIRs

• Severity is the key issue

• Firms are unlikely to get full limits from one carrier - Line Slips and Excess common

Venue

Venue

• High Verdicts- Philadelphia, Las Vegas, New York City, Texas, Mississippi

• “Small town” attorneys/fear of publicity

• Uncharted waters/emerging areas- South Dakota, Iowa, Idaho

REVIEW OF RECENT ATTORNEY MALPRACTICE CASE- GUESS THE RESULT

• Insured was retained to prosecute an underlying medical malpractice case seeking damages for a catastrophic injury sustained by James Jones as a result of an anesthesia mishap during an operation. The insured represented James Jones, his wife (Linda Jones) and their minor child, Rachel. At the time of the suit, Linda was James’s personal representative and guardian. James was left without any cognitive functions and is unaware of his surroundings. The Insured obtained a settlement in the total amount of $17,034,000. This was the highest recorded settlement involving a personal injury case ever recorded in the state. Subsequent to the settlement James’s parents assumed guardianship of James from Linda. The parents (on behalf of James) assert that the insured had a conflict of interest in representing both James and his wife child. In sum, they assert that James did not get his fair share of the settlement. They assert that James should have received 80% of the total settlement rather than the 14% he received.

Area of Practice

Top 5 AOPs by Claim Count (ABA)

• Personal Injury - Plaintiff

• Real Estate

• Family Law

• Estate, Trust and Probate

• Corporate/Business Organization

Lower Risk AOPs

• Criminal - Low frequency and severity

• Defense - Low frequency / can be high severity - changing?

• Business Transactions - Low frequency / can be high severity - watch for trends

• Civil Rights

Medium Risk AOPs

• Family Law - not impacted by trends much

• Tax

• Wills, Estate - can be high severity / low frequency - changes in law can impact

• Collections & Bankruptcy - traditionally lower risk, but high severity has pushed this up - very impacted by economy

Higher Risk AOPs

• Plaintiff - Personal Injury - high frequency / medium severity

• Plaintiff - Med Mal - high severity due to underlying cases - watch for trends

• Real Estate - Commercial and Residential

• Banking

• Intellectual Property

• Securities

Top 8 AOP’s - claims excess of $1M

• Bodily Injury/Medical Malpractice

• Patent/Copyright/ Trademark

• Estates/Trusts/Wills

• Real Estate

• Commercial

• Labor Law

• Securities

• Environmental

10 AOPs By Severity

• Securities Law

• PI Plaintiff

• Corporate Formation

• Commercial Practice

• Estate, Trust & Probate

• Litigation (excluding criminal and insurance defense)

• Insurance Defense

• Bankruptcy

• Real Estate

Coverage

Coverage Issues - Claims

• Prior knowledge

• Claims made/reported within the policy period

• Fraud in the application

• Professional services

• Criminal/fraudulent/dishonest/intentional acts

Coverage Issues - Underwriting

• Soft market has created higher limits than needed / Deductibles not keeping pace

• Choice of Counsel

• Pre-Claims assistance provisions

• Innocent Partner Coverage

• Predecessor Firm Coverage

Emerging Issues

Emerging Issues

• Fee Suits

• Substance Abuse (true clash potential)

• Economic Issues

• Bankruptcies

• Sarbanes-Oxley

• Multi-Disciplinary Practices

Q&A

Christopher Troisi, Zurich North America

Denise Olson, CNA Insurance

CARE

September 19, 2002