Legal malpractice suits on the rise, survey finds

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By Pat Murphy
Dolan Media

Law firms are facing a surge in malpractice claims, with conflict of interest issues being the leading source of exposure to liability.

Those are the highlights from “Lawyers’ Professional Liability Claims Trends: 2011,” a recent survey of six of the nation’s leading providers of professional liability insurance.

“The increase in the frequency of claims is largely due to the effects of the recent recession, including the enduring real estate market slump,” the report said. “As law firm clients continue to encounter financial difficulties and the impact on their business becomes more pronounced, they are more inclined to seek redress from their advisers.”

The report cautions firms to be particularly careful during the initial phases of representation in order to avoid becoming targets for a malpractice claim should the client’s financial situation worsen.

The survey was conducted this spring by Ames & Gough, a specialty insurance brokerage based in McLean, Va.

The six insurers that participated in the survey are AXIS, Beazley, Berkley Select, CNA, Lexington and Hartford. Together, those companies insure approximately 75 percent of U.S. law firms with more than 35 attorneys.

Four of the six insurers polled indicated that the number of malpractice claims filed is up in 2011, with reported increases ranging from six to 20 percent.

The other two insurers reported numbers similar to 2010.

What are the practice areas facing the most exposure?

According to the survey, most claims fall within three practice areas, with real estate leading the way. Corporate and securities work generates the second-most number of malpractice claims, followed by trusts and estate work.

The survey also indicated an increase in the number of big-figure claims, with five insurers reporting six to 20 percent increases in the number of claims with reserves over $500,000.

The report attributed the higher number of large claims to rising attorney fees, the cost of e-discovery, and “more aggressive plaintiffs’ attorneys producing greater complexity in the litigation.”

Five of the six insurers admitted to paying a claim of $50 million or more.

While conflict of interest was the cause of the largest number of claims, the insurance companies cited failure to meet a filing deadline as the second leading cause of malpractice litigation.

In its report, Ames & Gough recommended that law firms ensure that all attorneys – including lateral hires – be educated in the claim reporting requirements of their professional liability policies. The report further recommended that firms appoint a central coordinator to ensure the proper handling of malpractice claims or circumstances that may involve potential liability.

The survey can be obtained for free by emailing a request to [email protected].