Missouri legal malpractice: Claims of lawyers’ mistakes grow costlier [Missouri Lawyers Media]

Insurers paid three times more for closed Missouri legal malpractice claims last year than a decade ago, and rising defense costs are a likely culprit.

The average cost for a claim that closed with a payment of a settlement, judgment or verdict rose from $38,322 in 2001 to $120,014 in 2010, according to a June report on legal malpractice claims from the Missouri Department of Insurance.

Lawyers who handle legal malpractice cases and an insurance company official offer a variety of reasons for the increase, such as the increasing complexity of cases, the cost of experts, unwillingness to settle and pricier lawyer mistakes.

But statistics eliminate one of the usual suspects -- the number of claims -- as a reason for the increase. The number of claims closed each year has stayed in the 200s since 2001. Last year, 242 claims closed, up five from the previous year.

Jury verdicts also haven't spiked for The Bar Plan Mutual Insurance Co., said Steve Couch, vice president of claims. The Bar Plan had nearly 70 percent of the legal malpractice insurance market in Missouri last year, according to the Department of Insurance.

Most insurers elsewhere have seen a spike in the severity of judgments, Couch said.

National statistics weren't available. The last year covered in American Bar Association's most recent report on legal malpractice claims was 2007, before the economic downturn.

Defense costs are left as the main explanation for the rising cost of claims.

"Across the board, the costs to defend cases are increasing," Couch said.

The Bar Plan hasn't responded with an increase in premiums; the insurer hasn't raised rates in five years, he said. The insurer had $10.8 million in earned premiums in Missouri in 2010, and incurred $5.9 million in losses, according to information posted on the Department of Insurance website. That compares to $11.9 million earned premiums and $5.5 million in losses the previous year. The insurer has responded by expansion into other states and "disciplined" underwriting, among other tactics, Couch said in an email. But the rise in claim costs has put significant pressure on the premium rates, he said. "These costs will no doubt have to be factored into our rates as we move forward," Couch said in the email.

Legal malpractice claims are costly to begin with because of both sides' reluctance to back down and the complexities of reviewing the underlying case, Couch said.

Little experience

Couch and Michael Downey, an Armstrong Teasdale partner who has been involved in prosecuting and defending legal malpractice cases, both cited pricier lawyer mistakes as one possible reason for the increase in claims costs.

The economy has led more lawyers to take on cases in practice areas where they have little experience because their other work dried up, Downey said. They might then make bigger mistakes. The practice area can make a big difference in the cost of a mistake, he said.

"Large corporate transactions drive the dollar value up," Downey said. "If it's a missing deadline in a workers'  comp case you have a pretty limited damage amount. Sometimes you'll settle before filing [a lawsuit]."

The lack of experience cuts both ways, Couch said.

While the Bar Plan used to see the same plaintiffs' lawyers filing legal malpractice claims regularly, now the regular filers are "far surpassed" by the number of new lawyers bringing legal malpractice claims, he said.

"There's a greater willingness by lawyers to sue other lawyers," Couch said.

There are fewer claims being brought by attorneys who had been more regular filers, Couch said in an email. Couch speculated that the cases aren't being referred on to the "traditional" filers and instead are being kept and brought by the attorneys less experienced in the practice.

The newbies' inexperience evaluating and handling the cases leads to longer litigation and more defense dollars spent defending the claims, Couch said.

"If new people are filing suits ... I don't see the connection there," to increased defense costs, said David Butsch, a partner with St. Louis firm Butsch Simeri Fields who occasionally handles legal malpractice cases.

"The insurance companies defend them vigorously, and in order to recover, you have to take it to trial, or bring it up to the brink of trial," Butsch said.

Expert witnesses

The expense of expert witnesses is what drives the cost of legal malpractice cases, said Butsch, who started out as a plaintiffs' attorney in a legal malpractice case over trust money that ended with an $857,000 verdict in August. He ended up on the witness stand in the case because he had worked on the underlying case, and was among the "parade" of five lawyers who testified in addition to the defense and plaintiffs' experts, who also were lawyers.

Martin Green also said that expert witnesses are among the bigger expenses of legal malpractice cases. Green, of St. Louis firm Green Jacobson, acts as an expert witness for lawyers who are being sued. Expert witnesses must review all the depositions, interview witnesses and read all the relevant cases, Green said. It's time consuming, and expensive for the party paying the witness, but there's no choice, he said.

"Parties in these cases now must have expert witnesses to support their case," Green said. "When I say must, I mean if they hope to win."

Plaintiffs' legal malpractice attorney Doug Dowd employs an expert before filing anything in court. The St. Louis attorney handles the cases frequently and last year won a $7.4 million settlement from Lathrop & Gage over the handling of a trade secrets lawsuit.

Dowd, of Dowd & Dowd, sends what he called a "courtesy letter" to lawyers with copies of the petition, an expert's opinion on the lawyer's alleged mistakes and the expert's curriculum vitae. Most of Dowd's cases settle without lawsuits being filed, he said.

It's possible other plaintiffs' attorneys aren't giving that sort of notice, Dowd said. Defendants' unwillingness to settle also probably leads to the rising defense cost, he said.

"They don't want to admit they were wrong."