1 For historical background on lawyers' professional liability, see, e.g., Howell, Edward B., Professional Dilemma: The Attorney's Prospective Insurability, 2 Lincoln L. Rev. 89, 90–91 (1967); Robert E. Leake, Jr., History of Lawyers' Liability Law, 13 Forum 800 (1978).Google Scholar

2 An article in the Wall Street Journul is frequently cited in support of the statement that in 1955 only 5 percent of all lawyers in the United States carried liability insurance. Falk, More Attorneys Hit with Suits by Clients Who Feel Badly Served, Wall Str. J., Oct. 10, 1969, at 2. The accuracy of the statement may be doubted, but no hard data are available to test it.Google Scholar

3 Dautch, Charles, Lawyers' Indemnity Insurance, 46 Com. L.J. 412, 414 (1941).Google Scholar

4 The Wall Street Journal article cited in note 2 supra stated that by 1969 the percentage of insured lawyers had increased to 95 percent. This figure, which was not supported by reference to a source, also is questionable. A survey conducted in 1967 among the members of the Philadelphia Bar Association showed that 65 percent of the solo practitioners and 83 percent of the law firms carried liability insurance. Herbert S. Denenberg, Victor T. Ehre, Jr., & Ronald L. Huling, Lawyers' Professional Liability Insurance: The Peril, the Protection, and the Price, 1970 Ins. L.J. 389, 391–92. Modern estimates tend to be consistent with the results of the survey rather than with the Wall Street Journal article.Google Scholar

5 Denenberg et al., supra note 4, at 395, mention 17 American insurers as being so listed in an industry directory indicating coverages offered. Another author lists 13 insurers by name and refers to “at least twelve” other companies that offered the coverage on a limited basis. Thomas F. Sheehan, The History of Lawyers' Professional Liability Insurance, 13 Forum 808, 809 (1978).Google Scholar

6 Denenberg et al., supra note 4, at 390, mentioned a loss ratio of 100.2 for the five-year period ending Dec. 31, 1967, as well as premium increases in the order of 75 percent and 100 percent in some states. Howell, supra note 1, at 90, had already reported the withdrawal of a major underwriter from the California market (in 1966).Google Scholar

7 Sheehan, supra note 5, at 810–11. Some of the other carriers refused to accept new applications but continued to renew existing policies.Google Scholar

8 In early 1980, there were five operating insurance carriers (often referred to by the misleading term “captive”) of diverse legal forms that were created by or with the support of professional organizations: the Lawyers ‘Mutual Insurance Company in California (a mutual), the Lawyers Mutual Liability Insurance Company of North Carolina (a mutual), the Ohio Bar Liability Insurance Company (a stock company), the Oregon State Bar Professional Liability Fund (a mutual-type assessable monopolistic fund administered by the Oregon State Bar), and the Texas Lawyers Insurance Exchange (a reciprocal). In addition, several insurance companies have been formed by lawyer-investors specifically for serving the lawyer market; they include the Lawyers Professional Liability Insurance Company in Florida and the Attorneys’ Liability Assurance Society Ltd. in Bermuda. Several state bar associations have created insurance organizations and maintain them in an inactive status, ready to be put into operation should the market for professional liability insurance become tight again. These lawyer-sponsored carriers have been patterned after similar organizations that were created by physicians and hospitals in response to the medical malpractice insurance crisis.Google Scholar

9 See, e.g., Review and Preview, Best's Rev., Prop./Casualty Ins. Ed., Jan 1980, at 10.Google Scholar

10 See note 8 supra.Google Scholar

11 Francis J. McCarthy, Insurance Aspects of Legal Malpractice, in American Bar Association, Section of Insurance, Negligence and Compensation Law, Professional Liability of Trial Lawyers: The Malpractice Question 50, 64 (Chicago: American Bar Association, 1979).Google Scholar

12 Id.Google Scholar

13 McCarthy, Francis J., Insurance Aspects of Legal Malpractice, 30 Fed. Ins. Counsel Q. (1980, forthcoming) (revised edition of McCarthy, supra note 11).Google Scholar

14 McCarthy, supra note 11, at 65.Google Scholar

15 See text at notes 11–14.Google Scholar

16 Known as the “long tail” of this type of insurance.Google Scholar

17 The difference between occurrence policies and claims-made policies is explained in more detail by Sol Kroll, The Professional Liability Policy “Claims Made,” 13 Forum 842 (1978).Google Scholar

18 For a discussion of the various problems involved in setting insurance rates and a review of the literature, see Leonard R. Freifelder, A Decision Theoretic Approach to Insurance Ratemaking, Monograph No. 4, S. S. Huebner Foundation for Insurance Education (Homewood, Ill.: Richard D. Irwin, lnc., 1976).Google Scholar

19 For a review of the criticism, see McCarthy, supra note 11, at 53–58, who also defends the insurers.Google Scholar

20 See, e.g., 1 Jon S. Hanson, Robert E. Dineen, & Michael B. Johnson, Monitoring Competition: A Means of Regulating the Property and Liability Insurance Business 348–82 (Milwaukee: National Association of Insurance Commissioners, 1974); United States Department of Justice, The Pricing and Marketing of Insurance: A Report of the U.S. Department of Justice to the Task Group on Antitrust Immunities 55–58 (Washington, D.C.: Government Printing Office, 1977).Google Scholar

21 A report prepared by the Nebraska Department of Insurance in June 1978 has documented this frustration and the difficulties encountered by regulators who want to exercise their responsibilities: Nebraska Department of Insurance, A Study of Lawyers' Professional Liability Insurance Markets and Rates, in American Bar Association, Special Committee on Lawyers' Professional Liability, Information Report 99 (Chicago: American Bar Association, Aug. 1978).Google Scholar

22 The Colorado statute is fairly typical. After spelling out the requirement to furnish the regular annual financial statement, referring specifically to the “convention blank” prescribed by the NAIC, it goes on to provide:.Google Scholar

Colo. Rev. Stat. § 10–3–208(2) (1973). See also Conn. Gen. Stat. Ann. § 38–24(c) (West Cum. Supp. 1980):.Google Scholar

The statements, according to § 38–24(a), are to be furnished “in such form and with such detail as is prescribed by the commissioner.” Wis. Stat. Ann. § 601.42(1)(a) (West Interim Annot. Serv., Mar. 1980) has an equally broad range.

23 The Florida statute cited in table 2 applies to health care professionals in addition to attorneys; a separate provision requires similar reports for product liability insurance: Fla. Stat Ann. § 624.433 (West Cum. Supp. 1979). See also Ariz. Rev. Stat. Ann. § 20–223.01 (Cum. Supp. 1979–80) (product liability); Calif. Bus. & Prof. Code § 801 (West Cum. Supp. 1980) (health care providers); Colo. Rev. Stat. § 10–1–124 (Cum. Supp. 1978) (medical malpractice).Google Scholar

24 So far, five books of reports have been published: naic Malpractice Claims, Vol. 1, Nos. 1–4 (Milwaukee: National Association of Insurance Commissioners, 1975–77), and Vol. 2, No. 1 (1978). One or two more books are planned.Google Scholar

25 naic Malpractice Claims, Vol. 2, No. 1, supra note 24, at 1.Google Scholar

26 See, e.g., Mallen, Ronald E., Recognizing and Defining Legal Malpractice, 30 S.C.L. Rev. 203 (1979); Martin, William L., Lawyers' Professional Liability—a Developing Crisis 43 Ins. Counsel J. 532, 534–35 (1976).Google Scholar

27 See, e.g., Leake, supra note 1, at 805; McCarthy, supra note 11, at 59–60.Google Scholar

28 See, e.g., McCarthy, supra note 11, at 59–60.Google Scholar

29 See generally Leake, supra note 1.Google Scholar

30 See, e.g., Huszagh, Frederick W. & Molloy, Donald W., Legal Malpractice: A Calculus for Reform, 37 Mont. L. Rev. 279 (1976).Google Scholar

31 See also id. at 287–88.Google Scholar

32 These well-known danger areas are frequently discussed in professional publications, and practicing attorneys are told how to avoid mistakes. See, e.g., Robert S. Hill, The Lawyer Malpractice Crisis, Trial Briefs [Illinois State Bar Association], April-May-June 1975, at 1.Google Scholar

33 See note 4 supra.Google Scholar

34 Stern, Duke Nordlinger, The West Virginia Legal Malpractice Experience, 4 W. Va. St. B.J. 135 (1978); id., Legal Malpractice in Tennessee, Tenn. B.J., Nov. 1978, at 19. Of the full study, only a short summary was published: Duke Nordlinger Stern, Causes of Attorney Malpractice Claims, 3 Professional Liability Rep. 199 (1979).Google Scholar

35 Stern, West Virginia Experience, supra note 34, at 135.Google Scholar

36 Stern, Legal Malpractice in Tennessee, supra note 34, at 20.Google Scholar

37 Stern, Causes of Attorney Malpractice Claims, supra note 34.Google Scholar

38 The classes used by ISO are defined as follows:Google Scholar

• 81111—Lawyers—not members or employees of a partnership.

• 81113—Employed lawyers not named as insureds and employed law clerks, investigators and abstractors—not employees of a partnership.

• 81112—Lawyers—members or employees of a partnership.

• 81114—Employed lawyers not named as insureds and employed law clerks, investigators and abstractors—employees of a partnership.

See memorandum prepared by Rhonda M. Heller dated July 22, 1976, reproduced in American Bar Association, Special Committee on Lawyers Professional Liability, Legal Malpractice Insurance: A Primer for the Organized Bar, at A109 ([Chicago]: Special Committee on Lawyers Professional Liability, American Bar Association, Aug. 1977).Google Scholar

The definitions are phrased in awkward and confusing language. Essentially, classes 81113 and 81114 comprise persons performing ancillary work for lawyers in a subordinated position. Premium rates for those classes are substantially below those charged for lawyers working independently or as partners or associates of a law firm.Google Scholar

39 The statement of reasons for establishing the data center and the objectives to be achieved by it is reproduced in Appendix A.Google Scholar

40 See table 2 supra.Google Scholar

41 The committee does not wish to burden the system with mere incident reports, where insureds give the insurer notice of acts or occurrences that might conceivably result in a claim but where there has not yet been an indication that the potential claimant intends to make a claim or is even aware that he may have one. Insurers' procedures differ on this point, however, and the committee does not attempt to impose uniformity.Google Scholar

42 See note 24 supra.Google Scholar

43 See, e.g., John Woytash, Lawyer Mal-practice: Is a Crisis Coming? B. Leader, Oct 1976, at 18.Google Scholar

44 Oregon Rev. Stat. § 9.080.Google Scholar