Legal Malpractice Report

Executive summary

This report summarizes the legal malpractice insurance experience in Missouri from 1996 to 2005.

The charts, graphs and tables in this report are limited to closed claim information and were constructed from data collected by the Department of Insurance, Financial Institutions & Professional Registration as required by Section 383.077 RSMo.  The premium and loss data, obtained from the Missouri Page 20 Supplement to the companies’ annual statements, are presented in the final section.

In 2005, the loss ratio for legal malpractice insurance in Missouri was 113 percent.  For the 10-year period of claims closed , 704 (27 percent) were closed with payment.  Claims closed in 2005 totaled 252, a 4.2 percent decrease from the previous year, and 66 involved payments.  The average payment was $183,326.
The cost to an insurer for settling legal malpractice cases or the loss adjustment expense (legal fees, claims adjustment costs, etc.) has fluctuated over the past 10 years.  In 2005, the average loss adjustment expense for all claims closed with payment was $75,971, compared to $82,500 in 2004.

In producing this report, indemnities paid on closed claims have been categorized by claim characteristics.  The number of closed claims, average paid claim and the total amount paid are included.  The categories used for the indemnity analysis are:

By area of law, the largest share of claims closed in 2005 (67 of 252) was initiated by plaintiffs in personal injury and property damage cases. 

The largest proportion of all claims closed in 2005 and in the past 10 years involved the commencement of the legal action or proceeding.  Failure to know or ascertain deadlines correctly was the most common reason stated for filing a claim in 2005.   This alleged error also generated the largest number of claims over the 10 year span with  488 closed claims.  Of all claims paid during 2005, 45 percent were settled before filing suit or demanding hearing on the alleged malpractice.
  
In the last two sections of the indemnity analysis, years admitted to practice and insured/claimant relationship are also reported.  The three spans of years admitted to practice are:  under 4 years, 4 to 10 years and more than 10 years.  Ninety-five percent of losses in 2005 occurred among attorneys with more than 10 years of practice.  The insured's relationship to the claimant is partitioned into four subclasses: free legal service, non-client, member of pre-paid legal plan and client other than free legal service or pre-paid legal plan.  Eighty-five percent of 2005 claims occurred in the category of client other than free legal service or member of pre-paid legal plan.

 Only eight companies reported writing legal malpractice insurance and submitted closed claim data in Missouri for 2005.   The Bar Plan Mutual Insurance Company controlled at least 89 percent of the legal malpractice insurance market in this state.

This report was compiled using information submitted by insurance companies.  As a result, the accuracy of this report is dependent upon the correctness of each company’s data.  Copies of this report will be made available in braille, large print, or on audio cassette upon request.  Any questions regarding this report should be addressed to the Statistics Section, Department of Insurance, Financial Institutions & Professional Registration, P.O. Box 690, Jefferson City, MO 65102-0690.

The Department of Insurance, Financial Institutions & Professional Registration
is an Equal Opportunity Employer