CONTRIBUTION TO SELECTED INDUSTRIES 
THE INSURANCE INDUSTRY’S CONTRIBUTION TO THE LEGAL SERVICES INDUSTRY

The insurance industry—which is at times called upon to defend its policyholders in court—provides significant support to the legal services industry. In 2004 lawyers’ fees accounted for $10 out of every $100 in private passenger auto insurance premiums earned in 2004. Of these fees, half went to plaintiffs’ attorneys and the remainder to defendants’ attorneys.
LEGAL SERVICES INDUSTRY, 1997 AND 2002


 
1997
2002
Number of establishments176,248179,346
Receipts/revenues ($000)$128,549,213$182,650,380
Annual payroll ($000)$49,856,688$69,939,404
Number of employees1,035,4081,169,601
Source: U.S. Department of Commerce, Bureau of the Census.
Insurers are required to defend their policyholders against lawsuits. The costs to insurers for settling a claim are known as “defense and cost containment expenses incurred.” These costs include defense, litigation and medical cost containment expenses. Expenses for surveillance, litigation management and fees for appraisers, private investigators, hearing representatives and fraud investigators are also included. In addition, attorney fees may be incurred owing to a duty to defend, even when coverage does not exist, because attorneys must issue opinions about coverage. Other costs associated with engaging experts and fees for rehabilitation are also included.
DEFENSE COSTS AND COST CONTAINMENT EXPENSES
AS A PERCENT OF INCURRED LOSSES, 2005-2007 (1)

($000)


 
2005        
2006 
2007 


Amount
As a percent of incurred losses
Amount
As a percent of incurred losses
Amount
As a percent of incurred losses
Products liability$1,427,073 70.0%$876,030 134.5%$953,286 78.6%
Medical malpractice2,427,241 48.02,438,039 56.62,046,994 55.1
Commercial multiple peril (2)2,198,246 42.22,322,743 36.72,143,131 41.2
General liability (3)6,970,822 28.35,727,225 27.15,383,918 24.5
Workers compensation2,735,180 11.12,734,225 11.02,914,601 12.0
Commercial auto liability1,039,791 10.01,062,703 9.91,169,754 11.6
Private passenger auto liability3,775,207 6.63,716,987 6.63,646,956 6.1
All liability lines$20,573,560 15.9%$18,877,952 15.2%$18,258,640 14.5%
(1) Net of reinsurance, excluding state funds.
(2) Liability portion only.
(3) Excludes products liability.

Source: National Association of Insurance Commissioners (NAIC) Annual Statement Database, via Highline Data, LLC. Copyrighted information. No portion of this work may be copied or redistributed without the express written permission of Highline Data, LLC.