Equally relevant is the fact that the severity of claims against law firms is on the rise. More than ever, our industry is seeing larger defense costs as well as larger settlements, especially in firms with a greater propensity for high-risk practice areas–this is true even after adjusting for inflation.

Examples of high-risk areas of practice (AOPs) are antitrust/trade, plaintiff class action and plaintiff mass tort, securities, and intellectual property (specifically patent work). Although personal injury plaintiff and real estate claims tend to drive claim frequency, with family law and estate/probate/trust claims also prevalent, the higher hazard AOPs are highly complicated, and damages can be expensive.

The nature of legal work today is more complicated than ever, especially in the areas of corporate transactions and securities. The global practice of law and the constant changes to state and federal regulations make it very difficult to keep up to date.

All these factors have contributed to the trend of procuring more protection or seeking larger policy limits.

In common with many industries in the current economic conditions, law firms are enjoying the soft market conditions as the increased competition is enabling many firms to acquire more coverage and higher limits as the overall costs are reduced. Many variables affect pricing–attachment point, geographic location, area of practice, experience of attorneys and risk management procedures.

From an underwriting perspective, it's essential to select an insurance partner that is responsive and has demonstrated commitment to closely evaluating and analyzing every exposure.

For example, a good insurer partner will appreciate that risks are both technical and operational in nature. Being a great lawyer is not enough. Operational excellence is critical to malpractice avoidance while strong attorney-client relationships are critical to malpractice mitigation.

Most carriers know what the high hazard AOPs are. The difference lies in the ability to underwrite them effectively by recognizing the attributes of a well-run firm versus a poorly run firm for that particular AOP.

For example, you would look for specific docketing controls and specific language in engagement letters for an IP firm that might not be necessary for a general practice firm. Experience comes in handy when evaluating and defending higher AOP claims.

It's also an advantage to work with an excess insurer that understands how to address and underwrite the underlying coverages. Typically, the underwriting terms and conditions for the primary policy are not formalized until a deal is nearly complete. To that end, an excess insurer must have the expertise and experience to assess the deal quickly and provide accurate, fair pricing.

If the carrier takes a consultative approach to the business, bringing together insurance professionals from underwriting and claims, this enables the carrier to be more responsive to each of its clients and to create lasting partnerships. Getting in front of the firm and meeting the people at the firm gives the carrier a better picture of how that firm is run and how the risk might perform.

There are many providers of lawyers' primary and excess professional liability insurance, running the gamut from smaller niche insurers to large multiline carriers.

When determining what provider works best for your firm's needs, consider the following:

o Does the policy offered meet your specific needs regarding scope of coverage and adequate limits–today and in the future?

For example, does the law firm have expansion plans–geographically or into new areas of practice? Is the firm looking to grow via a merger or an acquisition?

Obviously a firm would want a carrier that can grow with it in terms of additional limits, financial strength, history of writing the coverage and handling claims on an excess basis.

o Is the insurer financially stable and therefore able to reimburse for a large claim using its own financial resources, or does it have to get approval from its reinsurer?

o Does the carrier have a strong track record and is it recognized for its underwriting and claims expertise in this area?

o Can the carrier support you in your efforts to develop a comprehensive risk management plan?

Common inquiries that we see on the primary insurance side pertain to access to a malpractice prevention hotline and to Web-based risk management tools and services, best practices regarding e-mail usage and retention, and guidance regarding document retention and destruction procedures:

o Can the carrier operate nationally, throughout North America and globally (if this is relevant to the law firm)?

o Does the excess policy follow the underlying form so there are no gaps in coverage between the underlying and the excess policies?

An example of a potential gap is one that exists if the primary carrier offers true worldwide coverage and the excess carrier requests that suits be brought in Canada or the United States and its territories.

o Is the carrier willing and able to engage in quota sharing for larger policies?

o Is the carrier selective about the other carriers over which it will write excess coverage?

o Does the firm have a legacy of serving law firms?

Law firms should take a strategic view of their professional liability procurement and evaluate the adequacy of coverage and limits against the needs of the firm–both for its current needs and future plans.

The firm should also conduct a thorough review of its risk management policies and procedures to ensure they are comprehensive and up to date.

Having a far-sighted approach rather than reacting when the need is immediate better enables law firms to establish relationships that are sustainable and provide continuity and consistency throughout the uncertainties of the market cycles.