October 05, 2011

Summary of the Testimony of William Freivogel

Before the Multidisciplinary Practice Commission

The next speaker was William Freivogel, Loss Prevention Counsel for Attorney Liability Assurance Society, Inc. (ALAS). ALAS, established in 1979, provides lawyer professional liability coverage for 320 large law firms representing approximately 49,000 lawyers. Its seven loss prevention lawyers assist on legal ethics and prevention issues. The insurer has experienced no claims against law firms arising from their ancillary business operations. Approximately 100-200 of the insured firms operate ancillary businesses. The ALAS insurance contract sets forth what constitutes ‘practice of law’ for purposes of coverage - draft contracts; try lawsuits; arbitrate; mediate; provide ADR services; act as notary public, agent for a title insurance company, trustee, executor, administrator, escrow agent and expert witness. (Certain of these functions do not, in fact, constitute the practice of law.) Director and Officer coverage is excluded except that a Corporate Secretary’s ministerial duties are covered. (An extra premium is paid for D & O coverage.)

Mr. Freivogel considered the effect of lawyers working with accountants as partners in an MDP as just another factor to include in the actuarial computation. He said MDPs would not necessarily increase conflicts of interest and thus malpractice in cases arising from transactions as clients should be given sufficient information to avoid confusion, the insured should use technology to check conflicts, and firm personnel should be trained and sensitized to the applicable rules. In response to Mr. Traynor’s query regarding the insured’s possible loss in a conflict of interest action, Mr. Freivogel said the claimant would allege he wasn’t informed he wasn’t the lawyer’s client. Ms. Katz mentioned that conflicts are often used to enflame the jury. It was hypothesized that lawyers in accounting firms are likely insured by accounting firm insurers, possibly Lloyd’s of London. Mr. Freivogel was not aware of any accounting firm lawyer being sued under the lawyer’s conflict of interest standard. He also couldn’t think of any claims arising from the non-U.S. office of a client.