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ATLA Mutual: insurance mismanagement allegations and glass houses



As I discussed in my column, ATLA frequently criticizes the insurance industry for supposed mismanagement. I suggested that if ATLA believes that the litigation crisis is solely a function of insurance company mismanagement, it should enter the insurance market. As it turns out, ATLA knows first-hand about insurance mismanagement.

For years, ATLA, through its mutual company, offered legal malpractice insurance to its members. But on October 14, 2004, the Illinois Office of the Special Deputy Receiver (OSDR) liquidated the insolvent "ATLA Mutual" (a/k/a Association of Trial Lawyers Assurance) in Docket No. 04 CH 16949, and various states' Guaranty Funds (i.e., the solvent insurance companies ATLA regularly criticizes) are now on the hook:

On October 14, 2004, an Agreed Order of Liquidation With a Finding of Insolvency, was entered against ATLA Mutual by Judge Donnersberger in the Circuit Court of Cook County, Illinois. ATLA Mutual�s board of directors consented to the order, which was entered based on the Director�s complaint that ATLA Mutual was insolvent and could not pay its claims and other obligations as they become due and owing in the ordinary course of business.

ATLA Mutual is a mutual insurance company qualified under the Federal Liability Risk Retention Act of 1986. ATLA Mutual provided professional liability insurance, on a claims made basis to attorneys who are members of the Association of Trial Lawyers of America (�Association�), or to law firms in which one or more Association members are partners, associates, stockholders, or employees and who meet ATLA Mutual�s underwriting standards. ATLA Mutual wrote policy limits to $3,000,000 per occurrence and $3,500,000 in aggregate. Policies may have also included prior acts, extended reporting periods and/or excess of loss coverage. Self-insured retentions ranged from $5,000 to $100,000 per claim, inclusive of defense costs. In May of 1998, ATLA Mutual began offering claims made Employment Practices Liability Insurance. The coverage was offered to existing members as a complement to and enhancement of their existing liability insurance and to other members of the Association who wished to purchase this protection. In 2001 ATLA Mutual had formed a wholly owned subsidiary corporation �ATLA Mutual Insurance Agency� and the agency in turned formed a wholly owned subsidiary �Association of Trial Lawyers Assurance Risk Purchasing Group.� ATLA Mutual operates under a management service agreement with Self Insurance & Captive Managers, Inc.

At the close of business on December 31, 2000 ATLA Mutual had voluntarily decided to stop writing premium and enter into run-off of existing business. In 2002 ATLA Mutual recorded one extended reporting period. The �ATLA Mutual Insurance Agency� produced no commission income in 2003.

The liquidation order contains an injunction prohibiting suits against ATLA Mutual outside of the liquidation proceedings. The Order of Liquidation terminated ATLA Mutual�s duty to defend its policyholders pursuant to 215 ILCS 5/209(5), to pay claims other than through the liquidation procedures set forth in 215 ILCS 5/208 and 5/209, and further provides that no judgment against ATLA Mutual or against one of its insureds taken after the entry of the order of liquidation shall be considered in the liquidation proceedings as evidence of liability or of the amount of damages in support of a claim.

Policies have been cancelled; ATLA had stopped writing new insurance in 2000. Here are the Mutual Order of Liquidation and the Order Fixing Rights and Liabilities. Members have until October 14 of this year to file claims and October 16 of next year to file contingent claims. (See also Illinois State Medical Society schadenfreude press release, Jan. 17; Ann Knef, "Insurer of trial attorneys is broke", Madison County Record, Jan. 18). (Thanks to Stan Sipple for the suggestion.)

 

 


Isaac Gorodetski
Project Manager,
Center for Legal Policy at the
Manhattan Institute
igorodetski@manhattan-institute.org

Katherine Lazarski
Press Officer,
Manhattan Institute
klazarski@manhattan-institute.org

 

Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.