Lawyers quizzed about problems getting insurance
(Bloomberg) ? New York Attorney General Eliot Spitzer?s office interviewed class-action attorneys about difficulties they had getting malpractice insurance as he expanded his probe of collusion in the insurance industry.
Spitzer contacted lawyers at several firms in the National Association of Shareholder and Consumer Attorneys during the past few weeks, said Fred Isquith, the trade group?s president.
Members have said insurers, who blame them for driving up the cost of litigation claims, may be inappropriately dropping their coverage, Isquith said.
?It was like someone flicked a light switch? two years ago, said Lawrence Sucharow, a partner at Goodkind Labaton Rudoff & Sucharow LLP in New York and past president of the trade group, which has about 84 member firms.
?A number of the members expressed curiosity that they never had trouble in the past.?
Spitzer?s inquiry represents a new area for an investigation that began with accusations of bid-rigging and kickbacks among insurers and brokers.
Insurers have sparred with plaintiffs? attorneys in the past two years over efforts to cap damage awards and legal fees.
Class-action lawsuits have surged since the collapse of companies such as Enron Corp. in 2001.
Three insurers, Hartford Financial Services Group Inc., American Financial Group Inc., and Arch Capital Group Inc., have said they received subpoenas related to legal malpractice insurance since December 3.
Isquith, a New York partner with Wolf Haldenstein Adler Freeman & Herz LLP, declined to name the firms Spitzer has contacted.
At least one of the queries came from Spitzer?s antitrust lawyers, he said.
Isquith and Sucharow declined to comment on whether their firms had been contacted.
Spitzer said in an interview yesterday that it was too early to determine what his probe of the malpractice insurance may find. He declined to be more specific about the nature of the probe.
Robert Hartwig, chief economist for the industry-sponsored Insurance Information Institute in New York, said there was nothing inappropriate about insurers backing away from policies covering class-action lawyers because the risks have increased.
?Legal malpractice is becoming a big problem, just like medical malpractice,? Hartwig said. ?It?s the case today that lawyers will turn on one another and sue one another.
?This has a direct impact on the price and availability of insurance.?
The three subpoenaed insurers wouldn?t say whether they were limited to policies for class-action attorneys.
Hartford spokeswoman Cynthia Michener, Arch spokeswoman Andrea Forman- Grinbaum and American Financial spokeswoman Anne Watson declined to comment about specifics of the requests.
?You would imagine Spitzer has some good evidence if he is really going in this direction,? said Gerald Bollman, a money manager at Clearwater, Florida-based Great Companies LLC, which manages $1.4 billion and owns shares of insurers such as American International Group Inc.
Spitzer may be looking for ?some sort of blood trail that says `I won?t write for the law firms if you don?t,? he said.
Spitzer has subpoenaed dozens of insurers and brokers this year and sued two brokers ? Marsh & McLennan Cos., the world?s largest, and Universal Life Resources Inc. in San Diego.
Marsh forced its chief executive, Jeffrey Greenberg, to resign after the New York-based company lost more than two-fifths of its market value because of the Oct. 14 suit.
Five insurance executives have pleaded guilty to rigging bids.
Regulators and plaintiffs? attorneys have worked together on the probe, which expanded from New York to states such as California, Florida and Connecticut.
California Attorney General John Garamendi hired San Diego- based Lerach Coughlin Stoia Geller Rudman & Robbins LLP to sue insurers MetLife Inc., Prudential Financial Inc., UnumProvident Corp., and Cigna Corp. on the state?s behalf last month. The same firm represents private clients in similar lawsuits.
Insurance regulators don?t require insurers to disclose the amount of legal malpractice policies they sell, so it?s difficult to assess the size of the market, Hartwig said.
The policies are reported to regulators as part of an ?other liability? category that had $203 billion in premiums last year, according to Paul Newsome, an analyst at A.G. Edwards & Sons Inc. in St. Louis.
Legal malpractice insurance is a type of policy known as ?errors and omissions,? which is often sold by insurers that also protect corporate executives and board members against lawsuits.
The largest insurers of US directors and officers are American International and Chubb Corp., according to a 2003 survey by Tillinghast-Towers Perrin in Stamford, Connecticut.
The consultant didn?t rank insurers selling errors and omissions policies.
Chubb spokesman Mark Greenberg declined to comment and American International spokesman Joe Norton didn?t return a call yesterday.
