I’m currently involved in a meeting at the State Bar offices in San Francisco. The focus of the meeting is to understand the availability and affordability of malpractice insurance.
Interesting that there is no consensus on the definition of affordability. The professionals in the room suggest that some lawyers will say that no amount of premium is affordable. My contention is that a 1 or 1.5% of gross receipts would be affordable. But 5, 6, or 10% of gross revenues is outlandish.
The discussion is also framed in the context that the malpractice insurance market today is "soft," that there are almost 30 carriers in the market … But, insurance rates will rise in the not too distant future. Premiums are based on loss experience, reinsurance availability and investment income. With the current financial crisis, investment income will decrease and this will dramatically impact insurance companies and their financial health … and then increase the premiums! No such decision should be based solely on this fact. The Bar needs a longer term perspective.
The Board of Governors has adopted the Rule of Professional Conduct requiring disclosure if the lawyer has no malpractice insurance coverage; thus, the focus of this group is how to help lawyers comply … that is, how the Bar can ferret out insurance premiums that are as small a percentage as possible of gross revenues (affordability).
The net result of the meeting is a mandate to do a survey to find out what lawyers think is "affordable." Hopefuly, the survey will produce meaningful information.