Highlights of the latest insurance cases from around the country.

The terrorist attack on the World Trade Center resulted in a large number of business interruption claims. Stated simply, business interruption coverage is intended to pay the financial losses incurred by an insured during the period necessary to repair the damage caused by an insured loss. Typical business interruption provisions allow for reimbursement of income lost and payment of fixed and continuing expenses. However, business interruption claims are still governed by the general maxim of insurance law: Recovery of insurance proceeds is not intended to place the insured in a better position than it would have been without the loss. Nevertheless, many policyholders are turning to their insurance companies to reimburse them in ways never contemplated by the parties or their insurance contracts. A prime example is the unwarranted attempts to expand the parameters of business interruption coverage in the wake of 9/11.

What can we make of the fact that the top 25 firms ranked by revenue in the AmLaw 200 have increased their overall presence in the media by around 18%, while firms ranked in the next two quarters (numbers 26 through 75) increased by barely 1%? Below the third quarter, the differences are even starker. Overall, the firms that were ranked 76 to 200 actually engendered fewer media appearances - by upwards of 5% in some instances - in 2002 than in 2001. <br>The easy response is that the larger the firm, the more lawyers and practice groups there are for reporters to call on as sources and commentators; coast-to-coast and abroad. The law of nature is that the rich get richer. It applies to media profile as well.

In a recent edition, Professor William G. Ross analyzed the professional ethics restrictions incumbent upon lawyers who want to bill by the hour for previously produced work product. ("The Ethics of Billing by the Hour for 'Recycled' Work," August 2003.) Edward Poll, one of our prominent Board members, responds to the issue.

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Until 2001, the general view was that IRS determinations of "unreasonable compensation" were not a concern for shareholder employees of professional corporations. That equanimity was shattered - at least for those paying attention - by the 2001 Tax Court decision in <i>Pediatric Surgical Associates P.C. v. Commissioner</i> (T.C. Memorandum 2001-81). In that case, the tax court determined that compensation paid to the shareholder physicians in a Texas surgical practice was unreasonably high because it exceeded the value of the services performed by the firm's shareholder physicians. This seminal tax court opinion turned on the issue of profits generated by the non-shareholder surgeons. Analogous compensation scenarios are common in law firms PCs, so they could face similar IRS determinations, with similarly costly results. Lawyers who are PC shareholders should pay close attention to this case.

Set aside some quiet time every year to think through your insurance and risk management programs with someone knowledgeable in the field. Law firm administrators are mostly not insurance experts, and unless there is some crisis, tend not to give this area the attention it needs. Crisis time may be too late.

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<b><i>Without Working Longer Hours or Raising Rates</b></i><p>In today's competitive environment, the profitability challenge to law firms is to increase profits while reducing clients' legal fees. This two-part article provides dozens of specific, workable ideas for enhancing profitability, leaving aside the played-out (and problematic) methods of working longer hours and raising hourly rates. This month's article offers ideas in the following categories, which together offer the greatest opportunities for profitability enhancement.

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J.W. Toothman and W.G. Ross, <i>Legal Fees: Law and Management</i>. Carolina Academic Press, April 2003, 350 pp. plus appendix, cloth, ISBN 0-89089-068-4, $85.00.