2021 is now in the rearview mirror. COVID has created challenges for businesses. As the world isolated much of our economy and workforce went virtual. Bad actors, known as “hackers”, saw opportunities in our rapidly expanded remote business environment. An October report by AON identified cyberattacks and data breaches as the No. 1 global threat to businesses.
Cyber threats have increased the risk for law firms as small businesses have become more dependant upon technology. According to an October 2021 report, cyber intrusion attacks have jumped 125% year over year. Ransomware and denial of service attacks are driving first-party coverage losses, with an average down time of 23 days and an average cost of $1.85 million according to the same report.
Ransomware attacks happen when a “hacker” uses “phishing” to trick someone in an organization into clicking on a link or downloading a file that then installs a virus on their computer. The malware then spreads to any connected networks. The hacker then makes a demand (ransom) asking for payment to decrypt the files. Even if the ransom is paid, statistics show that on average 10% of the data is not recoverable.
Protecting your passwords is the first line of defense against a hacker. Privilege abuse was involved in 80% of breaches. Hackers have a myriad of ways of stealing passwords. Once they have a password it’s difficult to detect the bad actors when they’re using legitimate credentials. Once they’re in, installing a keylogger is easy, and the hacker will have every keystroke you create during the workday. Many risk managers are now recommending the use of Multi-factor authentication, or MFA. An MFA is a security mechanism that requires an individual to provide 2 or more credentials to authenticate their identity.
Underwriters are reacting by reducing capacity on first-party coverage. The 2021 fourth quarter renewal cycle has seen drastic rate increases while at the same time reducing first-party coverage limits. This means customers are paying more for less. As the international crisis heats up in Europe, 2022 promises to bring more of the same.
If clients haven’t implemented MFA inside their email, workstations and other critical software systems they should do so immediately. Underwriters are requiring MFA more and more.
In the expanding world of technology, the need for and importance of cyber insurance grows exponentially. For law firms, a cyber incident can lead to a loss of business, reputational damages, regulatory penalties and lawsuits. The cyber insurance market is changing. However, the cost for a dependable cyber insurance policy is not prohibitive. Pricing for most solo attorneys is under $1,000, for the lowest policy limits. Contact Kaestner & Berry for more information on how to protect your business in the event of a cyber attack.
Over the past 20 months, law firms have become a top 5 industry target for cyber actors/criminals, right behind financial institutions, healthcare, and educational organizations.
The sustained onslaught of cyber-attacks including ransomware, email compromises, and social engineering have dramatically driven up claims and incident costs and have either forced many insurers to raise rates, reduce capacity and in many cases, pulling out of providing cyber insurance for law firms.
According to one carrier that specializes in cyber coverage for law firms, the increase in the type of cyber claims has been as follows:
Ransomware – The number of ransomware infections increased by 207% and the number of ransomware infections resulting in data exfiltration increased by 396%
Social Engineering – The number of social engineering incidents increased by 153%
Business Email Compromise – The number of compromises increased by 46%
Data Breach – The number of breaches (non-ransomware related) increased by 41%
These increases are significant and highlight the risk that law firms face from a cyber claim. If you are interested in a quote to protect your firm from a cyber risk, contact Kaestner & Berry.
Lawyers buying malpractice insurance for the first time are surprised when their premium goes up year over year when nothing seems to change. This increase is on account of a standard insurance industry practice known as a Step Rate.
What is a Step-Rate increase?
The first year your firm has a professional liability policy, your coverage only includes the current year of legal work. As a result, the underwriter actually provides a discount. After the first year renewal, your premium will increase as the policy covers an additional year of legal work. The increase is a result of the underwriter gradually reducing the discount.
How long does Step-Rating last?
Step rating typically ends in 5-7 years depending on various factors, including the state in which you are located. You cannot avoid the impact of step rating by switching carriers as almost all carriers use step rating.
What else is making my rates change?
Changes in limits, deductible, areas of practice, number of attorneys, claims, changes in firm procedures as well as a carrier’s change in underwriting guidelines could impact your premium.
“Come gather ‘round people, wherever you roam, and admit that the waters around you have grown, and accept it that soon you’ll be drenched to the bone, if your time to you is worth savin’, and you better start swimmin’, or you’ll sink like a stone, for the times they are a-changin’”
Yes, 2021 is ushering in a number of changes for all of us. If your practice is changing, here is a list of high risk areas of practice that may impact your malpractice insurance coverage.
Cannabis Representation – Nationwide the insurance and financial industries have not been able to reconcile an industry that is illegal at the federal level and legal in many states. As a result, pricing is high, if available, even for lawyers who are just giving advice to these businesses.
Plaintiff Class Action and Mass Tort work and to a lesser extent defense work in this area. Almost universally class action and mass tort are viewed as a high risk. Many underwriters will not write a firm doing this work.
Medical Malpractice Plaintiff Work – Traditionally, a high claim area of practice.
Collection Work
High Volume Estate Work – Claim statistics are showing an increase in severity in this area of the law.
High Value Family Law – Claim statistics are showing an increase in severity.
IP Work – Viewed as extremely high risk. Many underwriters will not provide terms for a firm doing this type of work.
Securities Work – High severity.
We are not suggesting that you not take on these representations for your clients, however, you should be aware that adding these areas of practice to the work performed at your firm will likely have an impact on your malpractice insurance costs.
If there are any questions, please contact your Kaestner & Berry representation for assistance.
At Kaestner & Berry we are independent agents who specialize in helping law firms meet the challenges of a changing world.
Have you considered your risk for an EPLI claim? EPLI claims are on the rise. In 2017, there were 84,000 charges filed with the EEOC. The median judgement for employment law suits that went to trial in that year was $106,800.00. The mean award was $375,162. In 2017, there were 12,000 plus claims. Over $350,000,000 in employment related claims were paid that year.
Since 2017 a lot has happened. There are several different situations in the new post COVID-19 workplace, which can result in a potential EPLI claim.
Employers who lay off employees and/or recall other employees may face discrimination claims.
Employees transitioning back to work in the workplace may give rise to employment claims regarding accommodating disabilities and religious practices.
COVID-19 relief bills provide two new causes of action for failure to provide paid sick and family leave, and retaliation after the use of paid sick and family leave.
Vaccination requirements and incentives can give rise to disability and religious discrimination.
*Info from The Professional Liability Underwriter Society – “COVID-19 EPLI Update”
Kaestner & Berry is proud to introduce a “starter” EPLI policy from Safe Talent. The company has an A+ AM Best rating. It is designed for small to medium size law firms.
In most cases, the application consists of just 3 questions. The policy limits are $250,000. The deductible is $10,000. Pricing is based on the number of employees at the firm.
Number of Employees
Approximate Total Cost
1 to 5
$1,450
6 to 10
$2,050
11 to 20
$2,600
21 to 30
$3,300
Contact your Kaestner & Berry representative for details.
