First State Withdrawing From Role Oct. 1 : L.A. Legal Community Scrambling to Find a Lead Insurer
The Boston-based insurer that has provided legal malpractice protection for 6,500 members of the Los Angeles County Bar Assn. for the last three years is withdrawing as the program’s lead insurer as of Oct. 1, sending the legal community scrambling to find a replacement.
So far none has been found, according to Charles Vogel, the county bar’s president.
A lead insurer puts together an insurance package, selling off parts of the risk to other insurers, called reinsurers. It then collects the premiums, issues the policies and services the claims.
First State Insurance Co. would be willing to play a secondary role in a new county-bar package but has given up star billing, Chief Executive Ralph Palmieri confirmed from Boston Friday. Los Angeles attorneys have begun receiving notices from First State to the effect that, starting Oct. 1, their policies will not be renewed as individual anniversary dates arrive. First State is required to provide 60 days’ notice, Palmieri said.
Palmieri expressed optimism, however, that negotiations among First State, the bar’s Los Angeles-based insurance broker Emett & Chandler, and insurance syndicates at Lloyd’s, the London market, will yield a replacement policy by Oct. 1.
“We will be offering a renewal package,” he predicted. Spokesmen for Emett & Chandler likewise said their “expectation” is that replacement coverage will be available by Oct. 1.
Nonetheless, some nervous lawyers are apparently not waiting to see whether these negotiations bear fruit. “Our phones are ringing off the hook,” said Robert A. Chick, chief executive of Lawyers’ Mutual Insurance Co. in North Hollywood. Lawyers’ Mutual, organized in 1979 specifically to provide legal malpractice insurance, now covers about 6,500 attorneys.
“You’re having a tremendous contraction in availability of insurance,” Chick said, “and we’re having literally hundreds of applicants (for coverage).”
Awards Increasing
Claims and malpractice awards have increased in frequency and magnitude over the last few years, Chick said, as interest rates have been declining, catching casualty insurers between rising costs and falling revenues. As a result, their capacity to write insurance has been shrinking in a number of liability fields--including pollution, municipal liability and malpractice insurance for doctors, dentists, accountants and architects, among other professionals.
Ironically, insurers partly blame huge court awards and settlements, engineered by lawyers, for the drying up of coverage.
Los Angeles lawyers are not alone in dealing with a shortage of legal malpractice insurance, Vogel of First State said. Elsewhere in California and across the country, their colleagues face reduced coverage at substantially higher rates--if they can find protection at all, he said. (Information on how many lawyers carry legal malpractice coverage is not collected in California, however. A new law will require annual reports from carriers, starting next year.)
“There are a lot of ‘bare’ lawyers out there,” Chick said, referring to those unable to obtain or afford malpractice coverage. “There’s a definite crisis going on. We’re worried about being the last carrier left.” Lawyers’ Mutual does not have the capacity to insure all qualified applicants, he noted.
Meanwhile, the State Bar Assn. of California is exploring whether it can offer an affiliated program, as it did in the mid-1970s through Hartford-based Travelers. A State Bar committee on Friday recommended that brokers be invited to submit any “reasonable and appropriate” proposals for statewide coverage, said Brian Cochran, committee chairman.
Steve Whiteman, a law clerk in the State Bar’s office of professional standards in San Francisco, said the Los Angeles County bar’s experience “does mirror that in the country generally. The number of carriers in California has really dropped dramatically. There are only a couple still writing.”
