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Bar Issue Papers


Professional Liability Insurance Company
(Florida Lawyers Mutual Insurance Company)

I. Issue:
Professional liability insurance is intended to protect lawyers against any act, error, or omission which might give rise to a liability claim and result in the lawyer being held liable for damages.
In the past, there had been dramatic increases in premiums for professional liability insurance for lawyers in Florida. Professional liability insurance carriers attribute increased costs primarily to a substantial increase in claims made against professionals and the corresponding increase in losses actually incurred by the insurance companies; and catastrophe losses suffered by reinsurers result in higher premiums to insured lawyers. In addition, lower interest rates decreased the investment earnings of insurance companies and their ability to support insurance underwriting losses. Accordingly, it is conceivable that litigation arising out of alleged malpractice by lawyers might increase to such a level that professional liability insurance would not be available or insurance premiums could escalate to such an extent that coverage might not be affordable. In fact, this situation has been experienced by some Florida lawyers.
Most lawyers did not carry malpractice insurance before 1950. In the 1960s insurance carriers found they could write coverage for lawyers at a profit, and despite several federal and state decisions which increased the risk of lawyers being found liable for malpractice, insurance rates generally remained low through the mid­1970s. However, in the 1980s the market changed. The spread between investment income and underwriting losses narrowed; insurance companies increased their premiums, decreased coverage, tightened policy provisions, raised deductibles and reduced limits. (Bar News, 2­15­87)
Many excellent lawyers who practice in what have been considered "high risk" areas such as real estate, plaintiffs' personal injury, securities law and others had difficulty in getting liability coverage at any price. Many lawyers who had claims made against them, but who had not had any claims paid on their behalf, found it difficult to obtain continued coverage. Some lawyers who continued coverage with commercial companies, notwithstanding enormous premium increases, were suddenly advised that the company did not intend to continue to write professional liability coverage. Geographic considerations also caused lawyers to be denied coverage.

II. Bar Position:

A. The Florida Bar's Position:
The Bar studied the professional liability insurance situation in Florida for several years and was concerned with problems involving such insurance for Florida lawyers. It was believed to be in the public interest for Florida lawyers to carry such insurance. To that end, The Florida Bar created Florida Lawyers Mutual Insurance Company.
The mutual form of organization was chosen for the company because the policyholders elect the Board of Directors. The company believes that this form of organization will best allow it to provide a stable source of professional liability insurance. It should be emphasized, however, that the underwriting standards for the company will be consistent with sound insurance practices; that rates charged by the company will be established to ensure the company's long­term viability; and that claims will be administered in accordance with accepted insurance claims standards.
The company is a separate corporation run by an independent board who's members are elected by its insured's.

III. Background:
The Bar investigated numerous alternatives for providing lawyers professional liability insurance in Florida. Based upon those investigations and its experience in unsuccessful attempts to arrange for private companies to write professional liability insurance on a consistent and cost effective basis, the Bar determined that the best alternative was to endorse and encourage a mutual insurance company owned and operated for the sole benefit of Florida lawyers. In 1985, the Bar approved the expenditure of up to $50,000 for the investigation and study of forming a captive lawyers professional liability insurance company. In addition, in October 1986, the Bar sought contributions from Florida lawyers of $75 each to provide sufficient funds to organize such a company. Florida lawyers contributed an aggregate of approximately $260,000 in response to the request.
The company's primary objective is to provide a financially sound, stable long­term alternative to the commercial professional liability market for qualified Florida lawyers. The company is controlled by Florida lawyers. By limiting its business to the writing of professional liability insurance for Florida lawyers, only claims against such lawyers will effect the company's loss experience. It should be recognized, however, that the company was not organized for the purpose of providing lower premiums than are available from commercial carriers. Although the company expects to provide competitive rates, the premiums charged by the company is influenced by the company's actual claims experience and will be established in accordance with sound practices in the insurance business. In addition, the company is influenced substantially by the requirements of its reinsurers due to the company's necessity of obtaining reinsurance.
On March 3, 1987, the Company filed an Application for Permit to Organize a Domestic Insurance Company with the Department of Insurance of the State of Florida (the "Department"). The Company was incorporated on May 27, 1987. The permit was issued on July 15, 1987. The permit to organize an insurance company was valid for one year from the date of its issue and allowed the insurance company to (1) solicit applications for insurance policies and receive deposits of premiums on such policies and (2) raise the minimum surplus necessary to operate a Florida mutual insurance company.
After receiving the Department's permit, the company raised the needed amount of surplus and commenced operations on January 1, 1989. After ten complete years of operations ending December 31, 1998, the company has enjoyed outstanding results. By even the most critical review, the creation of Florida Lawyers Mutual Insurance Company is clearly addressing its objectives.
Benefits of Florida Lawyers Mutual Insurance Co.:
      • provide stability to the lawyers professional liability market. Many commercial carriers often withdraw from the market.
      • cover all geographic and professional areas of practice. Commercial carriers may or may not cover all practices.
      • operate as a mutual insurance company. There will be no stockholders. The owners of the company will be the Florida lawyers who become policyholders.
      • a member of the Board of Directors of FLMIC will be strategically located in all areas of the state for localized information.
      • premiums will be influenced by the company's actual loss experience in Florida.
      • operate on a direct basis, thus eliminating agents' commissions and reducing operating expenses.
      • be administered day­to­day by qualified insurance professionals along with recognized accounting and investment firms. The control of the company will be vested in the elected Board of Directors.
      • help to keep Florida insurance rates more competitive through improved risk management, claims control and underwriting procedures.
In 1997, the company joined together with other Bar­related insurance companies to form Lawyers Reinsurance Company, a Vermont captive reinsurance company. Also the company successfully lobbied to suspend the requirement that lawyers purchase surplus certificates as a condition of insurance.
Since becoming operational in 1989, the company has increased the number of insureds from 769 to 3,000 and the number of firms from 337 to 1,600.

IV. Facts/Statistics:
  • The Florida Bar raised on a voluntary basis $260,000 which was used toward the costs of formation of the Company. Some 3,450 lawyers contributed.
  • Since 1977, bar associations in other states have established, sponsored or helped organize lawyer­controlled professional liability insurance companies. Bar­affiliated or sponsored mutual insurance companies now operate in North Carolina (1977), California (1977), Minnesota (1981), Missouri (1985), Wisconsin (1986), Alabama (1989) and Kentucky (1989). Bar­related stock insurance companies have been established in Ohio (1978) and Oklahoma (1978). A reciprocal insurance exchange for lawyers was established in Texas (1978). Other reciprocal insurance funds include The Attorney Liability Protection Society Inc., which covers 13 states, and American National Lawyers Insurance Reciprocal was recently established by the Virginia State Bar. The only mandatory state bar insurance fund was established in Oregon (1978). All these companies are either the principal provider, or a major provider, of lawyers professional liability insurance in their respective states.
  • In 1981, the American Bar Association's Standing Committee on Lawyer's Professional Liability created the National Legal Malpractice Data Center. In mid­1986, the center released data based on 30,000 claims nationwide (Nov./Dec. 1986 Bar Leader):
-- legal malpractice claims occur with the highest frequency in a few specific areas of law: personal injury plaintiff, 25.1%, real estate 23.3%; collection and bankruptcy, 10.5%; family law 7.9%; estate, trust, probate, 7%.
-- 21.5% of all errors are in calendaring or docket control, which result in missed statutes of limitations;
-- 52.8% of all claims involve litigation activities.
  • Oregon is the only state bar that mandates liability insurance coverage for all attorneys.

FLORIDA LAWYERS MUTUAL INSURANCE COMPANY BOARD OF DIRECTORS


Donald Layton Braddock
P.O. Box 57385
Jacksonville, FL 32241­7385
(904)262­0150

Philip Allan Disque
Machen, Powers, Disque & Boyle
707 S.E. 3rd Ave., Ste. 400
Ft. Lauderdale, FL 33316
(954)764­4500		Ronald C. LaFace
Greenberg, Traurig et al.
P.O. Drawer 1838
Tallahassee, FL 32302­1838
(850)222­6891

Dennis Ketler Larry
P.O. Box 13010
Pensacola, FL 32591­3010
(850)434­9200
Ava K. Doppelt
Allen, Dyer, Doppelt, Milbrath & Gilchrist
255 South Orange Avenue
Suite 1401
Orlando, Fl 32802
(407) 841-2330		William E. Loucks
Smith, Hood, Perkins et al.
P.O. Box 15200
Daytona Beach, FL 32115
(904)254­6875
Ray Ferrero, Jr.
P.O. Box 350648
Ft. Lauderdale, FL 33335
(954)262-7575		Lake Lytal, Jr.
Lytal, Reiter, Clark et al.
P.O. Box 4056
West Palm Beach, FL 33402
(561)655­1990
J. Dudley Goodlette
Goodlette, Coleman & Johnson, P.A.
4001 Tamiami Trial N., Suite 300
Naples, FL 33940
(941)435­3535		Stephen A. Rappenecker
Holden, Rappenecker, et al.
P.O. Box 566
Gainesville, FL 32602
(352)377­5900
Craig Gibbs
The Law Office of Craig Gibbs
1200 Riverplace Blvd., Suite 810
Jacksonville, Fl 32207
(904) 396-4499

John F. Harkness, Jr.
The Florida Bar
651 E. Jefferson Street
Tallahassee, FL 32399
(850)561-5600

C. Lawrence Stagg
Akerman, Senterfitt & Edison, P.A.
P.O. Box 3273
Tampa, FL 33601­3273
(813)223­7333		Robert M. Sondak
9400 S. Dadeland Blvd., Suite 600
Miami, FL 33156
(305)670­0201

C. Gary Williams
Ausley & McMullen
P.O. Box 391
Tallahassee, FL 32302
(850)224­9115

Prepared by The Florida Bar Department of Public Information and Bar Services with the assistance of the Florida Lawyers Mutual Insurance Company.

[Revised: 07-09-2009 ]