LEGAL MALPRACTICE INSURERS PROBED
New York Asks if Class-Action Lawyers Are Targeted
By Siobhan Morrissey
December 17, 2004
It’s been a rumor circulating among some plaintiffs
lawyers, and now New York state is investigating. The issue is whether
insurance companies are refusing to provide malpractice coverage for
class-action litigators because their lawsuits are forcing insurers and
their clients to pay big awards and settlements.
"In a backdoor effort to cut off mass litigation at
its knees, they are refusing to write the policies for the lawyers who are
doing it," says Tim O’Brien, a Pensacola, Fla.-based attorney who
practices in Florida, Georgia and Mississippi.
The insurance industry states it’s nothing personal;
it’s just a business decision based on the cost of defending lawyers
accused of malpractice.
New York State Attorney General Eliot
Spitzer has launched an investigation into whether insurers are colluding
with each other to freeze out the class-action bar. His office has
subpoenaed a half-dozen insurers. Each of the companies—CNA Financial
Corp., General Electric Co.’s Employers Reinsurance Corp., The Hartford
Financial Services Group Inc., American Financial Group Inc., Arch Capital
Group Ltd., and St. Paul Travelers Companies Inc.—confirmed receipt of the
subpoenas either by telephone or in press releases posted on their Web
Robert Hartwig, chief economist for the Insurance
Information Institute in New York, says the decision by some insurers to
drop class-action attorneys is "simply a business decision" because the
cost of professional liability insurance has risen dramatically in the
past five years. Doctors, accountants, board directors and even
attorneys are increasingly subject to malpractice lawsuits, Hartwig
"It should come as no surprise to attorneys that they
themselves, as full-fledged participants in the litigation explosion, are
going to be sued by people who are unhappy with the outcome of their cases
and are then going to be sued by other attorneys," Hartwig says. "Lawyers
suing lawyers. There is no segment of the consumer industry that has
not seen the number of lawsuits skyrocket, attorneys included."
National Association of Shareholder and Consumer Attorneys, which provides
a forum for class-action attorneys, disagrees with Hartwig.
seem to be boycotting class-action firms," says the association’s
Washington representative, Pamela Gilbert. "Nobody who is having
difficulty getting legal malpractice insurance has had any increase in
lawsuits against them. There’s not a malpractice lawsuit problem
among the class-action bar."
Spitzer’s office won’t comment on the
focus of the investigation other than to say it started in mid-October and
there’s no end in sight.
"As Mr. Spitzer says, it will take as long
as it takes because you don’t know at the outset what kind of information
you are going to turn up," says Spitzer spokesman Marc Violette. He adds,
"No criminal charges have been filed."
While Spitzer’s office won’t
go into specifics, NASCAT President Fred Isquith says this is an antitrust
"What the attorney general is looking at is whether
this is in violation of fair competition and anti-competitive procedures,"
says Isquith, a New York City-based class-action attorney. "[Some]
things you can do alone you cannot do with friends."
Isquith, insurers nationwide are failing to write new policies and renew
"It first surfaced in our organization 2 to 2 ˝ years
ago, and my sense from talking to people within the organization is that
it is an expanding problem, especially as policies expire," Isquith
O’Brien says a couple of members from his firm will be
meeting with Spitzer on Monday to discuss this issue, among others,
because New York is the hub for several insurance companies. Also,
apparently, Spitzer is the only attorney general actively investigating
the insurers on this issue.
©2004 ABA Journal
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