Chicago, IL ~ November 8 - 10, 2006

2006 International 2006 International ConferenceConference

Session: Session: Into the Law Firm Looking Glass: Legal Into the Law Firm Looking Glass: Legal

E&O ClaimsE&O Claims

Panel Members:

Bruce A. Campbell – Campbell & Leboeuf, P.C.

Laura A. Dickey – Brown & Brown

Mark W. Henderson – Shand Morahan & Company, Inc.

Stuart Pattison – CNA Pro Open Brokerage

Paul Sewell – Brit Syndicates Limited 2987

I. Macro View of Insuring Law Firms

• Insurer challenges in insuring law firms• Critical skill sets needed to be successful in insuring

the lawyers E&O line Underwriting expertise Claims handling expertise Strong aligned defense panel

• Long term and short term players in the lawyers E&O market

• Current industry wide lawyers E&O underwriting results – profitable?

• Current reinsurer appetite for the lawyers E&O line

II. Perception vs. Reality:Bringing it Down To Earth

Challenges Faced by Brokers

And Retail Insurance Agents on

The Lawyers E&O Line

Carrier Challenges

Many carriers have a “zero tolerance policy” for some practice areas or classifications Perception: Firms that practice in hazardous

areas, i.e. class action, securities, are hazardous firms and bad risks that should be punished

Reality: Firms that practice in a hazardous area may be adept in that area and may actually be excellent risks

Carrier Challenges

Many carriers have a “zero tolerance policy” for some practice areas or classifications Down To Earth:

Be proactive Identify potential problems and discuss them with

the client so there are no surprises Gather any information that will make the carrier

comfortable with the risk

Carrier Challenges

Many carriers have a “zero tolerance policy” for some practice areas or classifications Down To Earth:

Whenever possible, set up conference call/meeting with the client and the carrier during the underwriting process

Client: Will appreciate the attention Will get a better grasp on the underwriting process

Carrier: Will be able to get the information they need to

underwrite the risk properly Will score points with the client and possibly win the

account

Carrier Challenges

Paperwork – carriers demand an onerous amount of completed forms before they will quote Perception:

If client is serious about obtaining coverage, they should be willing to provide all requested information

Carriers must have their own forms completed in order to easily access the necessary information

Carrier Challenges

Paperwork – carriers demand an onerous amount of completed forms before they will quote Reality:

Clients HATE filling out one application and are often insulted and frustrated when asked to complete multiple forms

In some cases, the client may feel like the carrier doesn’t want their business because they have placed another obstacle between the client and binding the policy

The information provided on application forms is input into the carriers computer system and is easily accessible through that system

Carrier Challenges

Paperwork – carriers demand an onerous amount of completed forms before they will quote Down To Earth:

If you have all of the information you need to underwrite the risk, is it really necessary to transpose that information onto your company’s forms?

Relaxing on this issue is to carriers benefit Clients will feel like you are more interested in obtaining

their business than in redundant paperwork Brokers/agents will be eternally grateful

Client Challenges

Most firms are looking for the cheapest quote Perception: all policies are the same

Believe that same limits, same deductible = same coverage

Law firms care about 3 things: Price Price Price

Client Challenges

Most firms are looking for the cheapest quote Reality:

Policy may offer radically different coverage than their current or other competing carriers

Law firms care about: Service of broker/agent Service of carrier Financial stability of carrier Claims handling Coverage Price

Client Challenges

Down To Earth: As a broker/agent, you must take great pains to explain

any policy or carrier differences to the client Develop a “continuing courtship” with the client

Continue communication with the clients throughout the policy term and through subsequent renewals

See to it that all of the firm’s insurance needs are being met Offer alternative services, i.e. risk management analysis

Client Challenges

Volatility of insurance market fosters distrust of broker/agent Perception:

Client believes that when a broker/agent request competitors’ pricing, they are trying to do something underhanded

“Just get me your best quote”

Client Challenges

Volatility of insurance market fosters distrust of broker/agent Reality:

LPL insurance underwriting is extremely discretionary Premiums are not static and may be negotiable If a carrier can’t get to a certain price, they will be

upfront about it

Client Challenges

Volatility of insurance market fosters distrust of broker/agent Down To Earth:

In order to get the best policy, clients should work with the broker/agent in their negotiations with the carrier

Approach the insurance application process from a negotiator’s state of mind, as opposed to an adversary’s state of mind

Don’t take the premium negotiation process personally – look at it like a settlement negotiation, where both parties negotiate to reach a figure that satisfies the needs of both

III.A. Lawyers as Corporate Watchdogs

• Lawyers join accountants with both now clearly cast in role of “corporate watchdogs”

• The ever expanding role of statutory liability in Lawyers E&O claims Sarbanes Oxley, securities laws,

bankruptcy code amendments, FDCPA, state consumer protection and deceptive trade practices statutes

Lawyers as Corporate Watchdogs (cont’d)

• Sarbanes Oxley How law firms are exposed What law firms can do to protect

themselves Re-emergence of liability to third parties

for aiding and abetting client breaches of fiduciary duties.

Lawyers as Corporate Watchdogs (cont’d)

• Insolvent law firm clients as a major severity exposure area

• “Client adversity” driven claims on the increase Need to underwrite “the client” in addition

to underwriting “the firm”

Lawyers as Corporate Watchdogs (cont’d)

• Recommended broad use of internet resources and tools as an ever more important underwriting tool Search for broad array of information on

the firm Search for client related information

III.B. Managing Claims in This Hostile Environment

• General types of claim handling challenges on the lawyers E&O product line

• Claim handling strategies when “the deck is stacked against you” Juror biases in favor of plaintiffs Juror biases against corporate defendants and

lawyers Problem jurisdictions and forums Large damage backdrops and their impact on

claims

III.B. Managing Claims in This Hostile Environment

• Solution: Manage the data Manage the truth Manage the perception

12/25/99 Accident & death of Plaintiff’s daughter

11/2/01Associate telephones Plaintiff re. waiver of service; sends letter

3/26/02Co. Court appoints Sister as Temp. Administrator of Deceased's Estate

1/3/02 Plaintiff signs waiver,

agreeing to appoint sister as temp. administrator

Ins. Co. hires Law Firm; Associate

assigned to case

5/24/02Settlement releases Driver, Auto Owner & Ins. Co.

7/17/02Court closes Temp. Administration (later reopens)

12/20/05Appellate Court upholds summary judgment

11/19/04Court grants Summary Judgment “in all respects.”

Driver files MSJ

Plaintiff appeals Judgment

12/18/03Plaintiff sues Law

Firm Defendants for legal malpractice

9/5/04Plaintiff fails to

designate Expert Witness by deadline

5/12/06 Law Firm

files MSJ

1. no attorney-client relationship

2. no equitable estoppel on limitations

3.valid accord and satisfaction

8/31/06Defendants’ MSJ

1. no attorney-client relationship

2. no equitable estoppel on limitations

3. valid accord and satisfaction

6/25/03Plaintiff sues Driver for wrongful death and survival

1. no attorney-client relationship

2. no equitable estoppel on limitations

3. valid accord and satisfaction

12/26/01Statute of

Limitations

12/4/04End of Discovery

4. 10 other grounds

Motion for Summary Judgment

Timeline of Events

IV.A. Law Firm Cultural

• Symptoms of Culture Problems Ongoing turnover of lawyer associates

and support staff Ongoing turnover of clients due to poor

client relations Claims frequency and severity

IV.A. Law Firm Cultural

Stage 1: The Boss’ Firm autocratic “top down” management styles position and compensation is determined

by longevity emphasis on procedures Traps: domineering, seeks to place

blame, rigid class consciousness, everything is filtered through “us vs. them”

IV.A. Law Firm Cultural

Stage 2: The Team position and compensation is determined

by results ($$) managing partner coaches well-trained

staff emphasis on strategy problem personality profiles Traps: materialism, burnout, succeed at

any cost

There are Litigators… and then there are TRIAL LAWYERS. Litigators spend their lives and clients’ money preparing, delaying, and preparing to delay. A TRIAL LAWYER gets it done by excelling as a savvy pressure-broker, combining streetwise know-how with an intense drive to win.

Blake,You win !Steve

IV.A. Law Firm Cultural

Stage 3: The Diverse Firm positions are deemphasized partners mentor the members of the firm emphasis on equality the “glass ceiling” is discarded ongoing client demands for increased

diversity Traps: all laws rules are relative, all

people are victims

IV.A. Law Firm Cultural

Stage 4: The Wiki Firm function, rather than position, determines

who’s turn it is to lead partners are catalysts that encourage self-

direction emphasis on adaptability excels at understanding complex issues Traps: pragmatism (to the point they

appear unprincipled)

IV.B. Risk Management

• Can insurers make an underwriting profit on lawyers E&O and other E&O lines without risk management? Firms present ever more complex risk profiles Larger damage backdrops mean “stakes get

ever higher” Insured’s problems inevitably become the

insurer’s problems• Expensive and antagonistic coverage dispute litigation

Risk Management (cont’d)

• What financial and other incentives are in place to encourage law firms to implement risk management?

• Can law firm management efforts and results be quantied/measured?

V. Into the Looking Glass

• What will the practice of law look like ten years from now?

• What will lawyers E&O insurance look like ten years from now?