Coverage Had Been Withdrawn in August : L.A. Bar Offering Malpractice Insurance
The Los Angeles County Bar Assn. is again offering its 6,500 members legal malpractice insurance protection on the expiration of current policies, which were written by a firm whose withdrawal from the program in August had sent lawyers scrambling to protect themselves.
President Charles Vogel said in an interview Wednesday that the new coverage is being shared by two carriers: London-based H. S. Weaver, a large, independent underwriting syndicate that formerly worked with the bar association, is accepting 60% of the risk, with the balance held by New England Insurance Co. based in Hartford, Conn.
Welcome as that news may be to the legal community, the program brings no comfort to some of Los Angeles’ largest law firms, since the new coverage is limited to single practitioners and law firms of up to 50 members.
Legal Times, which covers the legal community, reported Monday that at least three well-known Los Angeles law firms are without any liability protection--or “bare,” as the trade says. These include Mitchell, Silberberg & Knupp; Wyman, Bautzer, Rothman, Kuchel & Silbert, and Manatt, Phelps, Rothenberg, Tunney & Phillips, the paper said.
“We’re between coverage,” confirmed Terry Christensen of Wyman, Bautzer, which has 120 lawyers--35 of whom are partners and, therefore, personally liable for judgments against their firm.
“All the large firms are going to have this problem when their anniversary dates come up,” he predicted. “Ours happened to be Oct. 30.”
But, Christensen added, the company secured insurance coverage from its old carrier for any future claims arising from cases handled up through Oct. 30. Meanwhile, partners are being extremely careful in reviewing legal opinions and maintaining the firm’s standards of practice, he said. “Now we’re maniaical.”
But smaller partnerships and single practitioners can find coverage with the new county bar program and one offered by Lawyers’ Mutual Insurance Co. of North Hollywood. Bar President Vogel said $2 million to $4 million in coverage is available with a choice of $1,000 or $5,000 deductible. However, premiums are running three to five times larger than those members paid the previous lead carrier, First State Insurance Co. of Boston.
The county bar’s broker, Emett & Chandler, is accepting and processing applications, Vogel added, but the policy documents themselves are not yet available.
Lawyers’ Mutual, which was inundated with requests for coverage in August when First State Insurance withdrew as the bar’s lead carrier, continues to provide coverage, according to the firm’s chief executive, Robert A. Chick. Its customer base has grown to about 8,000 from 6,500 last summer, he said. “A day doesn’t go buy that we don’t have 20 to 25 applications here,” he noted.
Lawyers’ Mutual raised premiums an average of about 35%, effective Nov. 1, he added, and it is charging a “membership fee” that increases its surplus, enabling it to provide additional coverage. The company, formed in 1979, avoided the rampant premium cutting that reduced rates by one-half by 1982 and even more by 1984, when claims began increasing sharply because of the lowered underwriting standards, he said.
That rate-slashing spree has shrunk available insurance capacity nationally--and even internationally--in a number of professional liability fields as insurers such as First State withdraw coverage and those remaining reduce coverage and boost premiums in an effort to cover continuing losses.
Meanwhile, two of Los Angeles’ largest law firms have managed to obtain liability protection--though at sharply higher rates.
Harry L. Hufford, chief administrative officer of Gibson Dunn & Crutcher, said the 475-attorney partnership secured new coverage July 1 from a Bermuda-based carrier with the disconcerting acronym of ALAS (Attorneys Liability Assurance Society). Hufford said Gibson Dunn decided to switch after receiving an unsatisfactory quotation from its broker--a quotation that called for sharply higher premiums and restricted coverage.
“We didn’t get as much as we were seeking,” Hufford said of the new policy, “but we think we got sufficient coverage.” While the premium is “substantially” higher than that for the previous policy, it is “dramatically less than the alternative,” he said.
O’Melveny & Myers, the other half of the Los Angeles “Big Two,” also found a home with ALAS, Legal Times reported, adding that ALAS has since stopped writing coverage for California firms.