Lawyers Face Higher Insurance Premiums

By AMANDA BRONSTAD

Staff Reporter

L.A. law firms, already paying the highest professional insurance rates in the nation, face premium increases that could reach as high as 60 percent in the coming year.

The rising rates could spell disaster for firms already suffering from declining profits caused by the depressed economy, said Elliott Rothman, vice president of Newport Beach-based Professional Practice Insurance Brokers Inc., an affiliate of Hilb Rogal & Hamilton Co.

“At the worst end, gigantic premium increases to a firm that’s not doing well, or has problems among its partners anyway, could cause a firm to dissolve,” he said.

While increases of greater than 50 percent are likely to be rare, a 15 percent jump in premiums appears to be the minimum firms are expecting.

“L.A. County historically pays the higher amount of premiums because L.A. County has the highest density of attorneys in the world and there’s more claims brought against L.A. County attorneys than any other place in the world,” said Ronda Cesarani, vice president of the lawyers division of Aon Direct Insurance Administrators. “But I think they’re ill-prepared.”

The Los Angeles division of Aon Corp. is the broker for members of the Los Angeles County Bar Association as well as the bar associations in Alameda, Santa Clara and Kern counties. The company, used by many smaller firms and solo practitioners in Los Angeles, expects its own increase to be about 15 percent next year.

Insurance costs traditionally account for 5 percent of a law firm’s expenses, Cesarani said. But with rising rate costs, that percentage could easily reach 10 percent.

For most small- to mid-sized law firms, the average premium is $3,000 to $4,000 per lawyer. During the early 1990s, when rates were at a peak, costs reached $10,000, she said. Larger firms typically have lower per-lawyer rates because of discounts they receive for volume business.

Sanford Hillsberg, managing partner of Los Angeles-based Troy & Gould, said the firm’s rates will likely increase by 10 percent when it renews its contract in the spring. But it’s also expecting to cut costs in other areas, including technology and outside services.

It does not expect to change its liability coverage, however. “This is not an environment in which it’s prudent to be reducing the amount of insurance you have,” he said.