Frequently Asked Questions About the Professional Liability Fund
As a board member and now chair of the OSB Professional Liability Fund, I hear a lot of comments and questions from lawyers about what the PLF does and does not do. I am taking this opportunity to dispel some misconceptions and share with all bar members answers to some of our most common questions.The PLF is an independently managed quasi-subdivision of the bar. Currently, Oregon is the only state in the country that requires lawyers to have malpractice insurance. We have our own board of directors, appointed by the OSB Board of Governors, which consists of nine members (seven attorneys and two public members) from across the state.
Your communications with the PLF are protected by statute as well as OSB and PLF policies. All claims information is confidential. All communication with our Oregon Attorney Assistance Program and practice management attorneys is also confidential. This confidentiality extends to the Oregon State Bar, including regulatory services (discipline), the Board of Governors, and all other OSB-related entities.
What are we doing to keep PLF coverage affordable? We work hard to keep the annual assessment both stable and as low as possible. The current $3,500 assessment hasn’t changed since 2011. We also offer discounts for new lawyers: 40 percent in the first year and 20 percent in the second and third years of coverage.
The assessment is set at the amount our actuaries predict will provide sufficient income during the year to cover the cost of claims and operating expenses. The cost-of-claims figure is based on predictions of the number of claims and the projected cost of those claims. Approximately 75 percent of your assessment dollars covers claims, and 25 percent goes to operations.
The assessment does not fully cover our claims costs, so the PLF relies on investments to make up the difference and to provide a reserve for significant losses. Because the PLF relies on its investment income to help pay for claims and operations, it must charge lawyers who pay in installments a finance charge to account for that loss of investment income.
Why do all lawyers pay the same amount, even part-time lawyers and lawyers who have never had claims? The fund is a shared-risk pool. To keep the assessment stable and affordable for all lawyers, we do not “underwrite” – or charge based on practice area, claims experience, or other factors. If we charged different rates for different lawyers or based on different practice areas, our operational costs would increase, thereby increasing our assessment. A single assessment also ensures everyone has coverage. If rates for some lawyers increased significantly, we would effectively disbar those lawyers who could not afford their assessment.
What areas of law generate the most claims and the most expensive claims? The most claims are generated by domestic relations (1,371 – 17 percent), personal injury (1,262 – 15 percent), and debtor-creditor/bankruptcy (1,111 – 13 percent).
The most expensive areas of law based on total indemnity paid are personal injury ($13,739,057 – 20 percent), real estate ($9,822,761 – 14 percent), and business law ($8,593,521 – 12 percent).
What about by size of firm? For claims opened in 2015, so far we have spent $6.52 million on claims against sole practitioners, $1.64 million for small firms (2-5 lawyers), and $1.71 million for claims against large firms (15 or more lawyers).
People also ask what other benefits they get from the liability fund. Twenty-five percent of our operating budget is devoted to loss prevention programs. The PLF produces more than 400 downloadable practice aids, maintains a library of 90 CLEs that can be downloaded and publishes four handbooks that are free to OSB members.
PLF claims attorneys field over 1,000 calls a year from covered parties about potential mistakes, risks, and coverage.
The fund’s three practice management attorneys field calls about best office systems, trust accounting, cyber protection, and similar issues. In 2016, they made 246 office visits throughout the state to work one-on-one with lawyers and staff on practice management systems.
Finally, the Oregon Attorney Assistance Program provides support to lawyers with mental health and addiction issues, career or life transitions, and other impediments to successful practice. The OAAP’s confidentiality is separate from both the Professional Liability Fund and the Oregon State Bar: No one at the PLF or at the OSB is provided any information about who uses the OAAP’s services or for what purpose.
Teresa A. Statler
PLF Board of Directors: 2013-2017
Chair, Board of Directors: 2017
Ms. Statler has a solo immigration law practice in Portland and has been an OSB member since 1991.
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Yes. Firms that renew their PLF excess coverage are eligible to receive a continuity credit of 2% for each full calendar year of continuous PLF excess coverage, up to a maximum total credit of 20 percent off the standard rate.
Reinsurance is the way insurance companies pass on some or all of the risk to bigger financial entities. Reinsurance is not necessary for the PLF's Primary Program, as the limits of coverage written ($300,000) are relatively small and the number of participating attorneys (7,350) is relatively large; any shortfall in revenue in one year can be made up by an increased assessment the following year.
When the PLF offers aggregate excess limits up to $10 million, the financial risk from unexpected claims becomes significant. Because of the scale of these risks, the PLF reinsures its Excess Program with top-rated reinsurers. These reinsurers have reserves of several billion dollars and can be relied upon to reimburse the PLF for any excess losses. The cost to the PLF for its reinsurance is fixed and cannot be increased due to losses. This gives the PLF Excess Program the financial strength and stability it needs to take on large risks.
Even though the Excess Program is 100 percent reinsured and holds a significant cash reserve against unknown contingencies, the PLF Board of Directors and the OSB Board of Governors believe it is appropriate to make the Excess Program assessable against Excess Program participants, just as the PLF's primary fund has been assessable against all Oregon lawyers since 1978. While the possibility of a supplemental assessment against participating firms is extremely remote, the two boards believe assessability is the best way to show Oregon lawyers who do not participate in the Excess Program that the Excess Program is financially independent of the PLF's mandatory, primary fund. With assessability, there can be no cross-subsidization of the Excess Program by the primary fund, and vice versa.
We believe the assessability feature, being 100 percent reinsured, and the PLF's capital surplus, is a real strength, as it assures Oregon lawyers who participate in the Excess Program that all excess claims will be paid.
A supplemental assessment would be required among Excess Program participants only if (1) there were significant excess claims in a particular year, (2) the reinsurers failed, and (3) the Excess Program was unable to make up any losses through its surplus and regular excess assessments in future years. The chance of all these circumstances occurring is exceedingly small. Just as there has never been a supplemental assessment for the PLF's mandatory, primary fund in over 30 years of PLF operations, it is unlikely there will ever be a supplemental assessment for the Excess Program. Our excess claims experience over the past twenty years has been good, and we utilize established, financially viable reinsurance companies.
When the PLF offers aggregate excess limits up to $10 million, the financial risk from unexpected claims becomes significant. Because of the scale of these risks, the PLF reinsures its Excess Program with top-rated reinsurers. These reinsurers have reserves of several billion dollars and can be relied upon to reimburse the PLF for any excess losses. The cost to the PLF for its reinsurance is fixed and cannot be increased due to losses. This gives the PLF Excess Program the financial strength and stability it needs to take on large risks.
Even though the Excess Program is 100 percent reinsured and holds a significant cash reserve against unknown contingencies, the PLF Board of Directors and the OSB Board of Governors believe it is appropriate to make the Excess Program assessable against Excess Program participants, just as the PLF's primary fund has been assessable against all Oregon lawyers since 1978. While the possibility of a supplemental assessment against participating firms is extremely remote, the two boards believe assessability is the best way to show Oregon lawyers who do not participate in the Excess Program that the Excess Program is financially independent of the PLF's mandatory, primary fund. With assessability, there can be no cross-subsidization of the Excess Program by the primary fund, and vice versa.
We believe the assessability feature, being 100 percent reinsured, and the PLF's capital surplus, is a real strength, as it assures Oregon lawyers who participate in the Excess Program that all excess claims will be paid.
A supplemental assessment would be required among Excess Program participants only if (1) there were significant excess claims in a particular year, (2) the reinsurers failed, and (3) the Excess Program was unable to make up any losses through its surplus and regular excess assessments in future years. The chance of all these circumstances occurring is exceedingly small. Just as there has never been a supplemental assessment for the PLF's mandatory, primary fund in over 30 years of PLF operations, it is unlikely there will ever be a supplemental assessment for the Excess Program. Our excess claims experience over the past twenty years has been good, and we utilize established, financially viable reinsurance companies.
No. As explained above, the Excess Program bears all of its own costs and is not subsidized by the PLF's mandatory, Primary Program. Excess claims are paid by the reinsurers and, if necessary, by the Excess Program’s surplus. The ongoing administrative costs of the Excess Program are paid from the Excess Program's regular annual assessments.
It depends. The PLF's Excess Program offers prior acts coverage to new applicant firms that have a current Excess policy in place with another carrier. However, the PLF may limit prior acts coverage in certain cases for new applicant firms with a previous history of claims or for other underwriting reasons. Prior acts coverage for individual attorneys in the firm is limited to work done for the firm or designated predecessor firm. New firm applicants that have not carried Excess previously (with the PLF or a commercial carrier) will have a retroactive date inception (RDI) limitation placed on their coverage that limits the coverage to work performed after the RDI.
Yes, although many of the exclusions in the Excess Plan are similar to the exclusions in the primary PLF Claims Made Plan, the exclusions have been modified to apply to the Excess Plan and should be read carefully. For example, because the Excess Plan is issued to law firms rather than to individual attorneys, the exclusions were modified to clarify which ones apply to all firm members and which apply only to certain firm members. See Section VII of the PLF Excess Plan to learn what additional exclusions apply that are not contained in the PLF Claims Made Plan.
The questions in Section D of the Application relate to claims and potential claims that have not yet been reported to the PLF, as well as past paid claims that exceeded PLF primary limits.
In answering these questions, we ask you to consider all claims, potential claims, suspense matters, and incidents (including acts, errors, or omissions, which may result in a claim) involving any current attorney with the firm or involving work performed by a former attorney while they were with the firm or a predecessor firm. For help in answering this question accurately, you should check with all current attorneys with the firm, either by circulating the Application or by sending a Firm Attorney Questionnaire. It is not necessary to contact former attorneys who worked for the firm or a predecessor firm to obtain this information. Simply answer the questions in Section D to the best of your present knowledge and the knowledge of the other attorneys currently with the firm.
Under the terms of the Claims Made Excess Plan, "innocent partner" coverage will be extended to a firm attorney who was unaware of a potential claim at the time this Application was completed, even though another firm attorney knew of the potential claim and failed to reveal it to us in the Application. However, this "innocent partner" coverage is available only if this Application or a Firm Attorney Questionnaire was circulated for verification among all firm attorneys. For this reason, you should circulate this Application or a Firm Attorney Questionnaire for verification among all firm attorneys (particularly as to potential claims), and retain a written record in your files that you have done so. If any firm attorney is presently on leave or on an extended vacation, you can wait until the attorney returns to seek the attorney's verification of the Application or Firm Attorney Questionnaire if necessary.
In answering these questions, we ask you to consider all claims, potential claims, suspense matters, and incidents (including acts, errors, or omissions, which may result in a claim) involving any current attorney with the firm or involving work performed by a former attorney while they were with the firm or a predecessor firm. For help in answering this question accurately, you should check with all current attorneys with the firm, either by circulating the Application or by sending a Firm Attorney Questionnaire. It is not necessary to contact former attorneys who worked for the firm or a predecessor firm to obtain this information. Simply answer the questions in Section D to the best of your present knowledge and the knowledge of the other attorneys currently with the firm.
Under the terms of the Claims Made Excess Plan, "innocent partner" coverage will be extended to a firm attorney who was unaware of a potential claim at the time this Application was completed, even though another firm attorney knew of the potential claim and failed to reveal it to us in the Application. However, this "innocent partner" coverage is available only if this Application or a Firm Attorney Questionnaire was circulated for verification among all firm attorneys. For this reason, you should circulate this Application or a Firm Attorney Questionnaire for verification among all firm attorneys (particularly as to potential claims), and retain a written record in your files that you have done so. If any firm attorney is presently on leave or on an extended vacation, you can wait until the attorney returns to seek the attorney's verification of the Application or Firm Attorney Questionnaire if necessary.
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