Lawyers Professional Liability Christopher Troisi, Zurich North America Denise Olson, CNA Insurance CARE September 19, 2002

Rating

Major Rating Factors # of Attorneys / Size of Firm Step (# of Years Claims Made) Area of Practice (AOP) State Limits and Deductibles Coverage provisions Claims history

Size of Firm

Small Firm Characteristics attorneys Tend toward Lower Risk AOPs Low Limits/Deductible Buying reputation protection Underlying risks smaller Stable partnerships or solo work Highest frequency / lowest severity

Midsize Firm Characteristics attorneys Constantly changing partners AOP Spread is broad Mid range Limits/Deductible (1M - 3M) Need coverage for financial protection Lower frequency, but still very high / higher severity

Large Firm Characteristics attorneys Broad AOP split / some multiple locations Higher Limits/Mid-range Deductibles - changing Underlying risk curve more severe Constant change, but less impact at this size Lower frequency / severity is more of an issue

Jumbo Firm Characteristics 100+ attorneys Broad AOP split / multi-location / some multi-national High Limits/SIRs Severity is the key issue Firms are unlikely to get full limits from one carrier - Line Slips and Excess common

Venue

High Verdicts- Philadelphia, Las Vegas, New York City, Texas, Mississippi “Small town” attorneys/fear of publicity Uncharted waters/emerging areas- South Dakota, Iowa, Idaho

REVIEW OF RECENT ATTORNEY MALPRACTICE CASE- GUESS THE RESULT Insured was retained to prosecute an underlying medical malpractice case seeking damages for a catastrophic injury sustained by James Jones as a result of an anesthesia mishap during an operation. The insured represented James Jones, his wife (Linda Jones) and their minor child, Rachel. At the time of the suit, Linda was James’s personal representative and guardian. James was left without any cognitive functions and is unaware of his surroundings. The Insured obtained a settlement in the total amount of $17,034,000. This was the highest recorded settlement involving a personal injury case ever recorded in the state. Subsequent to the settlement James’s parents assumed guardianship of James from Linda. The parents (on behalf of James) assert that the insured had a conflict of interest in representing both James and his wife child. In sum, they assert that James did not get his fair share of the settlement. They assert that James should have received 80% of the total settlement rather than the 14% he received.

Area of Practice

Top 5 AOPs by Claim Count (ABA) Personal Injury - Plaintiff Real Estate Family Law Estate, Trust and Probate Corporate/Business Organization

Lower Risk AOPs Criminal - Low frequency and severity Defense - Low frequency / can be high severity - changing? Business Transactions - Low frequency / can be high severity - watch for trends Civil Rights

Medium Risk AOPs Family Law - not impacted by trends much Tax Wills, Estate - can be high severity / low frequency - changes in law can impact Collections & Bankruptcy - traditionally lower risk, but high severity has pushed this up - very impacted by economy

Higher Risk AOPs Plaintiff - Personal Injury - high frequency / medium severity Plaintiff - Med Mal - high severity due to underlying cases - watch for trends Real Estate - Commercial and Residential Banking Intellectual Property Securities

Top 8 AOP’s - claims excess of $1M Bodily Injury/Medical Malpractice Patent/Copyright/ Trademark Estates/Trusts/Wills Real Estate Commercial Labor Law Securities Environmental

10 AOPs By Severity Securities Law PI Plaintiff Corporate Formation Commercial Practice Estate, Trust & Probate Litigation (excluding criminal and insurance defense) Insurance Defense Bankruptcy Real Estate

Coverage

Coverage Issues - Claims Prior knowledge Claims made/reported within the policy period Fraud in the application Professional services Criminal/fraudulent/dishonest/intentional acts

Coverage Issues - Underwriting Soft market has created higher limits than needed / Deductibles not keeping pace Choice of Counsel Pre-Claims assistance provisions Innocent Partner Coverage Predecessor Firm Coverage

Emerging Issues

Fee Suits Substance Abuse (true clash potential) Economic Issues Bankruptcies Sarbanes-Oxley Multi-Disciplinary Practices

Q&A Christopher Troisi, Zurich North America Denise Olson, CNA Insurance CARE September 19, 2002