In regards to the future of law practice, the role of malpractice carriers is a unique one. On this edition of The Digital Edge, hosts Sharon Nelson and Jim Calloway join Chris Newbold, the executive vice president of ALPS Malpractice Insurance, to discuss the role of malpractice carriers and how the risk assessment process can be an interesting way to look at the changes in law practice and the future of the profession.
Special thanks to our sponsors, ServeNow, Scorpion, Answer1, and Clio.
The Digital Edge
The Insurance Industry Studies the Future of Law Practice
Intro: Welcome to The Digital Edge with Sharon Nelson and Jim Calloway, your hosts, both legal technologists, authors and lecturers, invite industry professionals to discuss a new topic related to lawyers and technology. You are listening to Legal Talk Network.
Sharon D. Nelson: Welcome to the 130th edition of The Digital Edge: Lawyers and Technology. We are glad to have you with us.
I am Sharon Nelson, President of Sensei Enterprises, an information technology, cybersecurity and digital forensics firm in Fairfax, Virginia.
Jim Calloway: And I am Jim Calloway, Director of The Oklahoma Bar Association’s Management Assistance Program. Today, our topic is “The Insurance Industry Studies the Future of Law Practice”.
Sharon D. Nelson: Before we get started we’d like to thank our sponsors.
Thanks to our sponsor Clio. Clio’s cloud-based practice management software makes it easy to manage your law firm from intake to invoice. Try it for free at clio.com, that’s clio.com.
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Today we are very pleased to have as our guest Chris Newbold who is the Executive Vice President of ALPS Malpractice Insurance, the nation’s largest direct writer of lawyer’s professional liability insurance.
Based on his knowledge of the insurance space, familiarity with the challenges of small firms and solo practitioners, work with State Bar Associations from a strategic planning and value creation perspective, monitoring of legal trends, interest in technology and fascination about the changing landscape of the legal profession, he regularly speaks nationally about the future of law practice from his unique perspective.
Thanks for joining us today, Chris.
Chris Newbold: Thanks for having me, Jim and Sharon, and it’s a pleasure to be here with you.
Sharon D. Nelson: Well, Chris, we’ve talked a number of times about the future of law practice and perspectives on the future are plentiful; however, yours as a professional liability characters is pretty unique. So talk to us about the role of a malpractice carrier and how the risk assessment process is an interesting way to look at the changes in law practice in the future of the profession?
Chris Newbold: Yeah, I think it’s an interesting perspective that I think we bring because we’re keenly aware of kind of the different types of factors that generally can lead to a malpractice claim, and frankly, we’re in the business of predicting the likelihood of a malpractice claim by trying to understand the unique characteristics of a firm, what areas of practices that they are in and different other dynamics that ultimately allows us to be predictive in understanding whether there might be a higher degree of susceptibility to a malpractice claim, a negligence claim, an error or an omission.
And so, as we think about that and as we mark it to the legal profession, I think that we have some interesting perspectives as you think about the future of law practice.
Jim Calloway: Chris, national discussions continue to center on the changing demographics for the legal profession, how does ALPS look at these trends and how might that affect risk appetite and the ability of the profession to meet the expanding legal needs of the United States?
Chris Newbold: Jim, it’s a great question and in a word I think I would characterize the demographic shift as one as aging, right? And as you think about that, I mean, let me throw a couple statistics at you because I think it’s important for people and your listeners to kind of understand where the profession is going from a demographic standpoint.
55% of lawyers today are actually in the baby boomer generation, that’s a huge number, and as we think about kind of the different bookends of the profession, it’s going to have some really interesting dynamics as we move forward.
There used to be a time where in 1980, if you think about the medium age of a lawyer, back in 1980 the average age of a lawyer was 39, in 2005 that age had risen up to 49-years-old, and today I would venture to guess that the likely age of an attorney is in the 52 to 54 range and that means there’s a lot of kind of shifts in terms of what that means, but if you look at the other side of the spectrum, you’re also kind of dealing with a profession that has fewer and fewer lawyers coming into the practice.
So, again, going back to 1980s, 36% of the nation’s licensed lawyers were under the age of 35. That number dropped to 13% in 2005, 10% in 2010.
So we definitely are seeing a graying of the profession, if you will, and I think that has some really interesting ramifications particularly from a professional liability perspective.
Sharon D. Nelson: Well, you mentioned the graying of our profession, Chris, and the expected retirement of the baby boomer generation in the decades ahead, but from a malpractice perspective what can you tell us about this generation of lawyers and how is ALPS looking at this from a risk perspective?
Chris Newbold: Yeah, another great question because I think one of the things that’s naturally going to happen, I think lawyers, the traditional trends in terms of when people contemplate retirement, I’m not certain is kind of tethered to kind of how the things might play out in the legal profession.
So we’re seeing a point right now of — well, one of the things we’re trying to answer from the risk perspective is when will lawyers ultimately decide to retire or will they retire at all? I think it’s a very interesting question because is an aging lawyer a better risk in some respects because they will likely look to wind down their practice, take on fewer cases, probably cases of folks that they have great relationships with or as kind of naturally happens when folks age will they kind of lose some of their facilities, not be as sharp as they used to and there might be a greater risk from a malpractice carrier perspective.
I mean, we’re at a point right now that at least within our book of business that here at ALPS 31% of the lawyers that we now insure are over the age of 60, right? And so these are questions that I think all malpractice carriers are going to have to kind of grapple with this. How do you deal with aging attorneys and as they think about retirement, are they a good risk, are they more prone to a claim type of a risk, and how do you know, when do you know, how do you ask the right questions and how do you ultimately develop a risk appetite around that from a malpractice carrier perspective?
Jim Calloway: Yeah, that’s a very interesting discussion particularly as we hear statistics on baby boomers who haven’t saved enough for retirement, Chris.
Chris Newbold: Exactly. That’s right, because I do think that whether you haven’t saved enough in your 401(k) or whether you’re in a small town and that’s just become part of your identity, a lawyer sometimes can take two to three to four years to actually even unwind their practice, and so there’s just very different factors in play for a retiring lawyer and ultimately how they decide to wind down that career or if they get out of the career and then say that they want to kind of go back and still kind of dabble on a few cases or two. It’s going to be really interesting to see.
Jim Calloway: I agree and speaking of small town lawyers although not limited to small town lawyers, I know that ALPS specializes in insuring firms in the solo and small firm practitioner space, what trends are you seeing from a law firm dynamic perspective that have you excited, fearful, concerned or fascinated?
Chris Newbold: Yeah. It is interesting kind of serving in this space because a lot of the carriers in our marketplace generally kind of work toward the medium-sized or the larger sized firms and so we’re kind of in a unique position given the number of State Bar endorsements we have around the country and particularly those in rural states that have a really kind of a thumb on the pulse of kind of where some of the trends are going.
Obviously, I think this has been kind of well-documented that there’s been a movement of lawyers toward cities and that trend has continued. 20% of Americans live in rural areas, and the reality is, 2% of small law practices are actually servicing those rural areas.
And so, what that generally means is a larger number of unmet legal needs and I think some issues related to the professions challenge and trying to address some of the access to justice issues.
The other thing that I think that we’re seeing is, even in the small firm environment oftentimes we’re seeing attorneys specialize in the law, and obviously, if you’re leaving a big law firm and you’re seeking, for instance, a stronger or a better work-life balance, I think that that’s kind of an interesting dynamic in terms of just folks going out, developing a special team perhaps at a large firm and then parlaying that into a small firm or solo practitioner type of a practice and seeing a little bit more specialization than at least we were kind of accustomed to 10, 0 years ago when a lot of the main street lawyers, at least in our book of business we are really focusing on a generalist type of a mentality, working in five, six, seven, eight different types of areas of practice. And so we are starting to see a little bit more of movement towards specialization as well.
Jim Calloway: Before we move on to our next segment let’s take a quick commercial break.
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Welcome back to The Digital Edge on the Legal Talk Network. Today our subject is The Insurance Industry Studies the Future of Law Practice, and our guest is Chris Newbold, the Executive Vice President of ALPS Malpractice Insurance, the nation’s largest direct writer of lawyers’ professional liability insurance.
So, Chris, we are talking and hearing all the time about how technology is changing the manner in which Americans get to legal services. As we think about alternative legal service delivery models, what does that mean for how you assess risk and the role an attorney plays as a solution provider, particularly as a growing number of consumers seek legal assistance from a rising number of non-lawyer professionals?
Chris Newbold: Yeah. And I think overall, I think it’s an exciting trend from my perspective, because I am a person who really values seeing the profession being able to serve the legal needs of the country, but the reality is that we are in a generation where technology has lowered the playing field in terms of providing consumers more legal information to meet their own needs than ever before.
So you have got legal document preparers out there, you have got legal self-help sites, you have got kind of legal process outsourcing, and so while I think that has a chance to increase the affordability of legal services, I think the interesting thing that I think it does for practicing lawyers is it’s oftentimes going to put them in a position where they are going to be not always serving the kind of the A-Z legal needs of the client, but oftentimes coming in midstream where the consumer is coming in with some knowledge or some education or some presumption of how a legal need is going to be addressed. And then the lawyer is going to be kind of in a little bit more of a — kind of a limited — more limited scope representation assignment to be able to say okay, here is where you are right, here is where you are wrong, and then being able to kind of coach them through the remainder of the process.
So I think that’s going to be an interesting change in terms of how the lawyer kind of refocuses. They are going to come in. It’s a little bit of what I would call the WebMD effect, right? First time that you get a prognosis from a doctor, first thing you do is rush out to the Internet and kind of type in and try to learn as much as you can yourself, right?
I think the same thing is going to happen on the legal side, right? I may be interested in pursuing a divorce or I need a will or I need a trust, I think that people are going to kind of go out to the Internet, try to do as much as they can and then when they face a challenge in terms of knowing I am just not quite clear on what I need to do here, that’s when a lawyer is going to get involved.
So that’s going to be an interesting I think evolution for lawyers as they kind of start to see the consumers get a little bit more educated and what that means for them in terms of clearly defining what their scope of representation is, because oftentimes in the assertion of a malpractice claim unclear notions of scope will definitely play into the notion of, you said you were going to do this, I said I was going to do this, and the more that a lawyer is kind of coming in I think at midstream of that equation, I think the more susceptibility is for risk and for ultimately a malpractice claim for just kind of how the parties are kind of coming into the arrangement from the get-go.
Jim Calloway: Well, speaking of changing legal consumer marketplace and how consumers attain legal services, what trends are you seeing and what does that mean for our lawyer or listeners more generally?
Chris Newbold: Yeah, a couple of things. First of all, I think you are now seeing obviously with the Internet an empowerment of citizens to address their own legal matters, right? What does that mean? You have a generation who have grown up using the Internet to research, to study, to shop, to socialize, to play, and they are coming to the equation now with more expectations.
A couple of other things that I think are really unique. Oftentimes now we think about when we go out and do our own shopping, we are kind of susceptible to customer reviews, right; the Amazons, the Yelps and those types of things, I think that you are going to start to see more and more of that, of consumers starting to kind of weigh in on the effectiveness of the lawyers who serve them. So I think you are going to see more rating services, if you will, on behalf of entities assessing the quality of lawyers. That can be good, that could be bad, right, in terms of kind of understanding what goes in and what ultimately shapes those particular customer reviews.
And then I do see, I spoke about it a little bit earlier, kind of this notion of people kind of coming in and what they now call unbundled legal services, where they kind of come in, a consumer comes in and says, I only want help with this particular part of my legal need, and so being able to kind of narrowly scope that area of representation and being very — I think the lawyer is a little bit more vulnerable and the consumer is looking for a little bit more finite cost in terms of trying to control their cost, and again, how does that then interplay when those two kind of come together.
Sharon D. Nelson: Well, to shift just a little bit, lawyer mobility based on multijurisdictional practices and the rise of virtual law firms, these are facts that we are now all living with, but what are these shifts that are for some people kind of beneath the surface mean from a malpractice carrier perspective?
Chris Newbold: Yeah, frankly, it makes it harder. I think the traditional way is you had a law firm that was bricks and mortar, it was right down the street, you could understand their client base, you could understand the areas of practice that they were engaged in. The reality today is firms now have the capability to be much more virtual in nature. They can engage because of some attorney regulation softening in between states, that there is much more, what I call multijurisdictional practice, where they can be in multiple states or serve multiple states.
I think the more factors that you kind of enter into that equation, the more that it makes it more difficult for a malpractice carrier to kind of fully understand and appreciate the types of risks that those firms are taking on from a client perspective.
I mean, let’s be honest, with the power of mobile devices, web-based technology, and other types of technology, you could in essence create and manage a law firm from a beach in California or Florida or wherever you want to be, right?
Sharon D. Nelson: I would like to be on the beach.
Chris Newbold: Yeah, I would too.
Sharon D. Nelson: Can I take the beach please?
Chris Newbold: And so lawyers I think they have more options than ever because we work in an environment where we bring intellectual power to problem solving and so that creates a little bit more of a challenge I think from a malpractice carrier. So we are keeping a close eye on just kind of what that means from kind of the virtual law firm perspective, multijurisdictional practice, because again, the legal climate in one state; you guys are in Virginia and Oklahoma, I can tell you that there is very different factors in play in terms of the legal climate of those two states. So if you have a lawyer who is in essence practicing in both of those states, how do you underwrite that risk, how do you ask the questions necessary to be effective in terms of understanding the risk that you are taking on the book and then ultimately to the consumer, how you price that risk.
Jim Calloway: Well, as you know, Sharon and I are both heavily involved in law office technology. We know the era of big data, data analytics, predictive modeling is here, what might these shifts do to how legal work is done, particularly in certain areas of practice? Does it affect the risk profile of those who adopt artificial intelligence and automation in their law practice?
Chris Newbold: I do think that we know that the era of big data and artificial intelligence is here. I think right now you are seeing it employed a little bit more from the bigger law firms, but when you think about elements of law practice, and I will give you three examples.
One would be e-discovery, right? E-discovery used to be a challenge that associates would spend weeks of time searching through documents, searching through the types of things that gave them a better understanding of the cause of action and those e-discovery elements can now be done — in what used to be weeks, can be done in sometimes hours, right? And so it’s fundamentally changed the playing field, freeing up in my opinion more time for more of the intellectual work and application from an attorney. You have got e-discovery.
You have very interesting tools that play when it comes to predicting legal outcomes, understanding kind of where to file your suit in terms of how does one judge generally rule on certain matters, those become very important elements in terms of litigation strategy, and then, you had this whole semblance of folks who obviously work in the arena of business transactions in corporate law and they’re doing at times lots of due diligence work on mergers and acquisitions types of activity and simple things like being able to look at all of the contracts in play for a certain acquisition target and understanding the change of control provisions inherent in those particular contracts.
Those things can now be honed in on again in minutes and hours when it used to take days and weeks to be able to do that. So you have to kind of understand kind of where that’s going. I think it’s becoming more-and-more affordable for small firms and it’s lowering the — it’s leveling the playing field, so to speak, and so we need to be able to understand does that heightened risk, does it lower risk. In some respects I think that there’s some interesting evidence out there that says that it actually may make law firms better risks with the utilization of technology and being more thorough in their ability to be able to kind of tease that stuff out through Artificial Intelligence.
Jim Calloway: Before we move on to our last segment, let’s take a quick commercial break.
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Welcome back to The Digital Edge on the Legal Talk Network. Today, our subject is, “The Insurance Industry Studies the Future of Law Practice”, and our guest is Chris Newbold, the Executive Vice President of ALPS Malpractice Insurance, the nation’s largest direct writer of lawyer’s professional liability insurance.
So, Chris, in the final few minutes that we have, what other areas is ALPS keeping its eye on as you evaluate structure and price risk in the marketplace?
Chris Newbold: Let me give you three more that I think are just kind of very interesting. So, the first I would mention is, alternative billing models, right? So, the billable hour has been a century-old staple of the legal profession, and I would post you then in the next years that that staple is going to be slowly begin to be eroded, right? Because you got in-house legal departments from corporate America saying we’ve been pinched and they’re being pinched and they need to drive down legal costs.
And so, I think you see clients, particularly consumers, starting to say, you know what, I want to bring you my legal problem but I can’t just have this open-ended lack of information as to how long it’s going to take for you to actually solve my legal problem. So, I see things like fixed fees, flat fees, blended fees, cap fees, I see a whole new kind of era of alternative billing models coming into play, and I wonder at times whether that’s going to create more opportunity for there to be dissension between the client and the attorney.
For instance, if I’m doing a family law case or if I’m doing a trust in a State case, and the lawyer believes that it’s going to take me three hours and it ultimately takes him 12 hours how does that work, right? And so, I wonder about the — a lot of times malpractice claims arise from just the breakdown of client relations and so I wonder as we go to some alternative billing models, how will that interplay between the lawyer and the client relationship? So that’s one.
The second one I’d mention is, it’s just non-lawyer firm ownership is always an issue that we’re kind of intrigued by. We recently had a huddle here internally about couple of Utah lawyers who are interested in bringing on a non-lawyer firm owner who specialized in marketing — that play into the risk dynamic of a particular firm. Now that’s kind of commonplace more in some of the foreign jurisdictions in terms of the law.
The last one I would leave you with, Sharon, is I’m just fascinated by the demographics and the multi-generational workforce going on in the workplace right now. This is the first time in the nation’s history where four generations are working side by side in the workplace. You got the traditionalists, you’ve got the baby boomers, you got Gen X, you got Gen Y, you really got a generation gap of 50 years in law offices in some cases, and as we assess risks what’s going to happen in those firms is the mentorship going to transfer from one generation to the next, how will tech issues affect the firm?
One of the things I’m very keen on and active on is the well-being of attorneys. How will the culture of firms evolve when you have younger generations demanding a more favorable work-life balance, when you have senior attorneys who have put in 50, 60, 70 hours a week for 30 years?
And so, I think there’s some really interesting dynamics in terms of the well-being of lawyers and the law firm culture that will play out in the next five years and who wins some of those battles on the generational work force front, I think will be fascinating to watch.
Jim Calloway: Chris, I’m going to finish up with what’s probably a softball question for you. When I do training for brand-new lawyers and young lawyers I often stress to them the importance of documentation especially where the client has given instructions are made a decision. Now that we have a limited scope services rule in Oklahoma, I stress to the lawyers that maybe sometimes three or four documents and three or four client signatures might both better inform the client and better protect the lawyer than one signature on an extra-long document.
Can you advise our listeners how documentation or the lack of documentation impacts your ability to defend lawyers who are accused of professional liability violations?
Chris Newbold: Yeah, Jim, it’s a great question, and it’s absolutely critical, I mean documentation really becomes the foundational element for the proverbial he said/she said type of a situation, where he said you were going to do this, when I actually did this and I think there are easy ways through just the types of things that you mentioned in terms of finishing up your conversation, go ahead and typing out a quick email as to what you all agreed upon and then documenting the file. It doesn’t have to be much, email I think is totally sufficient. But the more that there’s clear documentation throughout the entirety of the client file I think the more that the lawyer protects themselves in terms of those situations where when things do happen to go awry, boy, it’s better to be able to rely on some written pieces of evidence than it is to kind of rely on I said this, you said this, and more often than not I think we know probably that the client is going to be able to win if it becomes a he said/she said situation.
And so, I would strongly encourage, I mean, it’s one of the biggest ways that a lawyer can prevent a malpractice claim through the effective documentation of the file. So, I thank you for raising that because I do think that a lot of malpractice claims can be prevented through just being able to effectively document the file and protect yourself.
Sharon D. Nelson: Well, I sure want to thank you today for being our guest, Chris. I know we worked together on the Virginia Committee on lawyer wellness and that’s been a pleasure and it’s been a pleasure working with you for several years now on the Virginia State Bar TECHSHOW and ALPS is always very good to us there. And I know you care a great deal about the future of law and what happens to lawyers and how to measure the risks for lawyers. So this has been very — I’m sure will be of great help to our listeners, and I’m sure they will be particularly interested by thinking about some of the statistics you mentioned and the graying of lawyers these days, it really is a phenomenon. But it’s been tremendously valuable information, and so, thank you so much for being our guest.
Chris Newbold: Well, thank you for having me, and I know that you all are both leaders in our profession as you kind of get issues onto the radar and we need more thoughtful discussion about these types of issues. So thank you for your leadership in The Digital Edge and it’s a real service to the profession.
Sharon D. Nelson: Thank you very much. And that does it for this edition of The Digital Edge: Lawyers and Technology. And remember, you can subscribe to all of the editions of this podcast at legaltalknetwork.com or on Apple Podcasts. And if you enjoyed our podcast, please rate us in Apple Podcasts.
Jim Calloway: Thanks for joining us. Goodbye, Ms. Sharon.
Sharon D. Nelson: Happy trails, cowboy.
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