When no one would provide professional liability insurance, the Bar-created company was there
By Megan E. Davis
Ray Ferrero, Jr., remembers the uneasy feeling of practicing law without professional liability insurance.
“I was practicing law in the 1970s when our carrier gave us a three-month notice and left the state, so for a period of time my firm was without coverage,” said Ferrero of Ft. Lauderdale, who served as Bar president in 1987. “That’s a very uncomfortable feeling for a lawyer. You practice the best you can and you try not to make make errors, but in the event something happens you want to protect your clients and yourself.”
Ferrero wasn’t alone. During the professional liability insurance crisis of the 1980s, a large number of Florida lawyers found themselves without professional liability insurance or faced rate hikes as high as 70 percent.
“It was a very volatile time,” he said.
Leadership at The Florida Bar answered the crisis by forming a captive insurance company “for lawyers, by lawyers.” A lasting impression of their efforts, Florida Lawyers Mutual Insurance Company celebrates its 25th anniversary this year.
FLMIC’s primary objective is to provide to qualified attorneys practicing in Florida a financially sound, stable, and perpetual source of attorney professional liability insurance.
The work began several years prior to the company’s formation when the Board of Governors asked Ferrero, who became the first president of FLMIC, to head a special committee to look into the insurance issue.
“The Florida Bar had endorsed a carrier and had some concerns about its viability,” he said.
On the committee’s recommendation, the Board of Governors revoked its endorsement of the company and asked the committee to continue its work and find an alternative solution to the insurance crises.
At the end of the day, Ferrero said, The Florida Bar followed the lead of other states by creating its own captive insurance company.
“Florida Lawyers was created to benefit members of the Bar by making professional liability protection both accessible and affordable to the practicing professional,” said John F. Harkness, Jr., the Bar’s executive director. “This company, owned by its members, became operational during 1988 and has impacted the professional liability market by making coverage available to Florida lawyers who meet the underwriting guidelines.”
The mutual form of ownership gives policyholders the right to participate in the management policies of the company by electing the board of directors.
Getting the fledging professional liability carrier operational presented a “huge learning curve,” said William E. Loucks, of Orange City, an original member of FLMIC’s board of directors who succeeded Ferrero as president of the company in 1999. He describes FLMIC as a company designed with the simple mission of existing to provide an equitable choice to the lawyers of Florida.
The board’s first task was to capitalize the captive insurance company by raising the $3 million needed to receive a certificate of insurance from the state.
“We went around the state meeting with lawyers and asking them to buy certificates in the amount of $500 to start the funding of this,” Ferrero said. “We had to go from Key West to Pensacola to get this done. We came up with $2.5 million.”
The Bar’s Board of Governors agreed to buy a $500,000 certificate in order to reach the $3 million mark. With a handful of employees occupying a few offices in the basement of The Florida Bar building in Tallahassee, the company began issuing policies effective January 1, 1989.
After creating the mutual company entity, assembling a board of directors, and hiring the staff, The Florida Bar unconditionally divested its ownership and terminated all operational management and control of the company.
Lawyers purchasing policies were required to purchase additional certificates.
“The company was received very well and we were advised by consultants that we would have a very large amount of premium during our first year,” Loucks said. “That turned out not to be true. As soon as we started operating, all the commercial professional liability carriers came back into the market. By the end of the first year, we had some 25, 30 carriers.”
Still, FLMIC persevered with its mission to be “a perpetual source of professional liability insurance for Florida lawyers.”
“We established good, sound underwriting criteria and determined premiums based on actuarial advice,” Loucks said. “If we’d decided to chase rates, the multimillion-dollar companies would have put us out of business. We stuck to our guns and never faltered. In my judgment, that’s the reason for our 25-year life and why we’ll continue to have 25 more.”
Ferrero also credits FLMIC’s success to how it handles claims.
“We make every effort to be physically in front of a lawyer who has a claim, sitting in that lawyer’s office and discussing the claim within 24 to 48 hours of receiving notice of the claim,” he said.
Twenty-five years later, the company’s surplus has grown from its original $3 million to $40 million.
FLMIC, today operating out of its own Oviedo offices, also repaid all the certificates the Bar and lawyers bought to help form the company.
FLMIC currently insures about 2,600 firms in Florida and a total of about 4,300 lawyers.
“This is just another example of The Florida Bar servicing the lawyers of the state in a very profound way, recognizing a problem and doing the due diligence to make sure that it’s addressed properly,” Ferrero said. “Not enough credit can be given to the leadership of the Bar at that time.”
Many past Florida Bar leaders are still involved in FLMIC’s leadership, including FLMIC directors Alan Bookman, a former Bar president; and former Board of Governors members Kimberly Bald, Juliet Murphy Roulhac, Dudley Goodlette, Stephen Rappenecker, and Robert Sondak.
FLMIC sponsored an exhibit at the Solo and Small Firm Conference January 24-25 and celebrated its 25th anniversary with attendees at the reception following the conference. The conference took place during The Florida Bar Winter Meeting at the Hilton Orlando Lake Buena Vista.
For more information about FLMIC, visit www.FLMIC.com.