Legal malpractice payouts are the highest on record, insurance broker reports
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Payouts for legal malpractice claims are at an all-time high, according to a new survey by insurance broker Ames & Gough.
The survey found:
• Nine of the 11 insurers participated in a legal malpractice claim payout of more than $50 million.
• Two of the 11 insurers paid a claim between $150 million and $300 million.
• Four of the 11 insurers paid a claim over $300 million.
Although payouts surged, the number of claims stayed the same or decreased for nine of the 11 insurers.
The 11 insurers surveyed provide insurance to 80% of the top-grossing law firms in the United States.
The largest number of claims stem from three practice areas: trusts and estates, business transactions, and corporate securities.
Claims for trusts and estates work are increasing as the baby boomer generation ages, and court decisions allow third parties to sue law firms for work on behalf of a client, according to Ames & Gough.
Ames & Gough recommends using an engagement letter that spells out whom the firm represents and what services will be performed, documenting communications, ensuring that the client has testamentary capacity, and maintaining a familiarity with fast-changing statutes and tax laws.