In this issue we interview Camille Stell, director of client services for Lawyers Mutual Liability Insurance Co. of North Carolina. Lawyers Mutual NC was the first bar-related insurance company (BRIC) in the country and served as a model for the more than 20 BRICs in the United States, Canada and Ireland.
LP: Thanks for answering a few questions about malpractice insurance for our readers. You have worked for years at the first BRIC in the country. Can you give us a little background about the BRIC model?
Stell: In the 1970s, malpractice lawsuits exploded. Commercial carriers exited markets or raised their premiums between 100 and 300 percent. Bar associations across the country searched for a resolution as their members struggled to find appropriate coverage. In North Carolina, the bar association’s insurance committee looked for a way to create stable coverage at a reasonable price. The answer was to form a mutual company to protect its members. A BRIC only offers legal malpractice insurance and other services to its attorney members.
The goal of a BRIC is to remain financially stable and not to generate a large profit, so it is likely that premiums decrease when conditions are favorable. Any year producing large profits would result in dividends being paid to policyholders.
LP: Are the various BRICs throughout the country affiliated in any way?
Stell: BRIC officers attend meetings of The National Association of Bar-Related Insurance Companies (NABRICO), an organization in which the various state companies work together to share practices so that all attorneys receive the best service possible.
LP: What type of underwriting philosophy is used by BRICs?
Stell: BRICs typically write one line of insurance in one state, and pricing is based on that alone. Because we have a unique knowledge of our risk environment, we are able to reflect this in our pricing.
LP: So is pricing the only component that should be considered when purchasing malpractice coverage?
Stell: Value should be a part of your consideration. For instance, service is among the most important elements of your purchase of coverage. Sales, underwriting, risk management, client services and claims need to all be under one roof—without brokers, agents or other middlemen to deal with. One of my colleagues, Laura Loyek, says, “My favorite part of working as a claims lawyer is helping North Carolina lawyers solve problems.” The company selected to write a firm’s insurance should have this type of interest at heart.
LP: Are there any other considerations that a firm should be aware of in making its malpractice insurance choice?
Stell: Yes, the resources available from, and the trust that the policyholder has, in the company. First, a malpractice insurance carrier should offer a variety of resources. Typical ones should include a company website, malpractice alerts, newsletters, and risk management resources, such as forms, sample letters and checklists. Also offered should be free or discount pricing on CLE programs, as well as presentation of educational programs at law firms or firm retreats. Your carrier should share resources and information via social media. The policyholder needs to have a feeling that calling for prevention advice before a claim is encouraged and facilitated.
Second, trust. Cathleen Sargent, vice president of underwriting for Lawyers’ Mutual in California (LMIC), says, “From the outset, we established a unique relationship with our policyholders. What makes us different? We created a company for California lawyers that was directed by California lawyers. LMIC’s one and only business is insuring California lawyers. From its inception, we committed 100 percent of our resources to our policyholders and developing professional liability programs. We understand the need for effective communication, and if you call LMIC, you can speak directly with an officer of the company. Based on our claims experience, we also developed superior loss prevention and CLE programs, which are free to our members, long before minimum continuing legal education (MCLE) became a mandatory requirement. LMIC maintains an unassailable level of financial stability and has set exceptional standards for stability, service, continuing education and performance—standards by which others must be measured.” In a word, Sargent is saying that a relationship between a firm and its liability carrier comes down to trust, and that is established when a carrier has such a comprehensive relationship with its policyholder.
LP: Finally, can you give our readers advice on how to determine the limits they should consider in the policy they establish with a carrier?
Stell: When selecting the limits of liability for your law firm, consider the value of the cases you handle, the risk associated with those cases, who bears the risk of loss if something happens, and the value of your firm (including the risk a suit would pose to its assets). You also need to consider the per-claim limits and the aggregate limits, usually expressed in a dollars-per-claim/dollars-in-aggregate format. For instance, a policy providing $100,000/$300,000 would provide you with up to $100,000 of coverage for each claim made against the policy in the policy year, up to a maximum aggregate of $300,000. Also, there are some areas of practice where the clients or vendors you communicate with will require a certain level of insurance to allow you to represent or transact with them.
In choosing a deductible, consider how much you are able to pay in the event of a loss. It would be typical for solo practitioners and small firms to choose deductibles in the range of $1,000 to $5,000. Generally, insurance companies will discourage or disallow deductibles in excess of $5,000 to $10,000 because of the high financial burden for a solo or small firm in the event of a claim. A firm needs to balance the premium savings achieved in selection of a high deductible against the extra risk assumed in the event of a claim.