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Special Section—PLUS 2006 Lawyers professional liability The source of many a joke, lawyers face serious challenges By Phil Zinkewicz There’s an old saw that goes, “You never really appreciate a lawyer until you need one.” That’s probably quite true; yet down through the ages, the legal profession has had a stigma attached to it. Shakespeare wrote, “Kill all the lawyers,” and Plato’s Republic calls for a utopian society with no place for lawyers at all. In more recent years, lawyers have been blamed for a tort liability system that has gone berserk. Lawyers—plaintiffs’ attorneys at any rate—are perceived as reaping hundreds of millions of dollars in class action lawsuits, while the actual insured parties receive only an infinitesimal monetary reward. One might assume that, despite all the epithets, barbs and just plain bad jokes, lawyers themselves are laughing all the way to the bank. Well, the trips to the bank may be continuing, but people in the professional liability insurance industry know that lawyers are not laughing anymore. Much-publicized debacles such as Enron, Tyco and ImClone have put the legal profession squarely into the spotlight. Moreover, Sarbanes-Oxley has turned up that light’s intensity. At this year’s annual PLUS Conference in Chicago, Mark Henderson, product manager for Shand Morahan & Co. in Deerfield, Illinois, will moderate a panel that will examine law firm culture as a driver of lawyers professional liability claims—particular types of claims. The panel will discuss the handling of such claims from the underwriter, agent, broker and adjuster perspectives, as well as advertising claims and class actions. The panel will also discuss how to mitigate these claims. Ttitled “Into the Law Firm Looking Glass—Legal E&O Claims,” the panel will include: Bruce Campbell, managing partner, Campbell & LeBoeuf, P.C., Addison, Texas; Laura Dickey, producer, Brown & Brown, Atlanta; Stuart Pattison, vice president, CNA Pro Open Brokerage, New York; and Tony Wilson, claims manager, Hiscox’s London Market Division. “We will be approaching the lawyers professional liability arena from six macro views,” says Henderson. “First, we will have a macro view of insuring law firms, examining state-of-the-market conditions. We want to determine whether the market has been profitable for insurers and to what degree. We will also touch upon the reinsurance industry’s view of LPL exposures. Second, we will look at the challenges faced by brokers in placing lawyer E&O business. “Third, we will consider the relatively recent phenomenon of lawyers as corporate watchdogs. Traditionally, the accountants were the watchdogs, but Sarbanes-Oxley has changed all that,” Henderson continues. “Fourth, we will be looking at law firm cultural issues. There are a good many law firms that operate within a dysfunctional culture, with artificial glass ceilings that prevent upward mobility for women and minorities. Fifth, we will look at the claims-handling process for lawyers professional liability. Lawyers have to come to grips with the fact that juries are not very sympathetic to lawyers. They are the bad guys. But law firms are sometimes in a culture of denial. Finally, we will endeavor to construct a picture of what law practices will look like 10 years from now.” Henderson says he will try to steer the panel discussion in the direction of the PLUS audience’s interests. “When we discuss lawyers professional liability and Sarbanes-Oxley, we usually think of the large, Fortune 500 companies. But most of the retailers in our audience deal with smaller law firms of 10 or 12 lawyers. Some of these law firms are autocratic, with little incentive to adjust to a changing society. We will address these law firms as well.” Henderson says that in his 22 years in the insurance industry, he has seen an increase in the frequency of lawyers professional liability claims, especially in the areas of corporate bankruptcies and client advertising. “In addition, the values are going up. There’s no question that it is a volatile business.” Despite the increase in frequency and severity of claims, the market for lawyers professional liability is “softening a little,” according to Henderson. “I don’t think the standard market is making all that much money on the line,” he says. “However, there has been more capital coming into the business. There are a good many new players who want a piece of that $2 billion to $3 billion pie, nationally.” Henderson hopes that this new capital doesn’t represent a return to cash flow underwriting. “The tail on this business is so volatile and the amounts of loss so staggering that it would be folly to practice cash flow underwriting,” he says. “I think it’s more a matter of people just wanting to get into the insurance business. But they should be careful to choose the right partners, the right distribution, the right reinsurances, the right everything. “Let’s face it. Underwriting lawyers professional liability is a high-wire act. It’s not a place for amateurs.” * |
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