Current Market Conditions in California for E&O Insurance
The current market conditions for Attorneys Errors & Omissions, (E&O) Insurance has improved greatly over the last several years, as far as the law firm is concerned – there are more programs than ever to choose from. However, E&O programs can and do differ substantially in what they do and do not cover. The selection and pricing of E&O policies today is based on areas of practice, location of the firm, claims history and risk management practices. However, there are other factors that often determine the success or failure of the program.
E&O is a volatile line of insurance. Standard lines of insurance, whether commercial or personal have extensive actuarial information that allows them to predict futures losses with great accuracy, allowing them to set rates that are adequate to cover losses and expenses and produce a profit. On the other hand, attorney’s professional liability insurance is tiny and new in comparison having neither the size nor history necessary to know with any certainty what constitutes an adequate premium. In addition, the legal profession itself is a moving target and ever changing in its E&O coverage needs. This uncertainty causes volatility in both pricing and availability. Any law firm that has been around for any significant period of time has seen many programs come and go. And even if the program survives, there is a succession of insurance companies that are enticed and then disappointed by the financial results of their participation.
The resulting churn of E&O programs and insurance companies can offer opportunities to save on premium in the short term, but often with a cost to the long term stability of the market place. It often comes down to a choice between a well-established and respected E&O program that charges a little more with a newer program with aggressive pricing and more restrictive coverage, that may be a short lived.
Lawyers’ Professional Liability is still a fairly unique product as insurance coverage goes. Competing E&O policies are not as standardized as other lines of insurance and it is recommended that you have a broker who is experienced and specializes in the field.