Almost all insurers that participated in a recent survey said they have been involved with a lawyers professional liability insurance (LPLI) claim of more than $50 million in the last two years — and at least one paid a claim that settled for over $400 million.
Ames & Gough released the results of its 12th annual LPLI survey of 11 leading insurers in the space: Argo, Crum & Forster, Brit, Everest, Ironshore, Markel, ProSight Specialty, Sompo International, Travelers, QBE and Swiss Re Corporate Solutions.
According to the results, four of the 11 insurers have paid a claim over $300 million. All but one of the insurers have participated in a claim of more than $50 million, and three paid a claim between $150 million and $300 million, found Ames & Gough, an insurance and risk advisor to law firms. All of the insurers polled had claims reserved over $500,000. One had six to 10 claims reserved at this amount.
“The experience of the insurers surveyed only tells part of the story,” said Eileen Garczynski, senior vice president at Ames & Gough, in a statement. “Anecdotally, we know of five claims that settled north of nine figures, including one over $400 million.”
Some of the insurers were likely involved in the same claims given quota-share coverage arrangements and excess limits, but Ames & Gough said it’s clear that the number of claims resulting in multimillion-dollar payouts has increased year-to-year and law firms need to “carefully consider the amount of limits they purchase.”
Trust and estates, business transactions, and corporate and securities continue to be the practice areas with the most claims activity, but the survey reveals insurance defense and taxation are on the rise. Ames & Gough said the “large volume of these claims made by an insurer against counsel retained to defend its insured is relatively new.” Although the ability of an insurer to sue its defense counsel varies by state, 18 percent of LPLI claims involved insurance defense claims in 2021. There were no claims of this type in all prior surveys.
Conflicts of interest continue to be the most frequent malpractice error across all practice areas.