Minnesota Lawyers Mutual Insurance Company and Subsidiaries - Page 10

            reserve for adverse loss development (adverse development                                  
                  1.  Case Reserve                                                                     
                  Petitioner’s case reserve is the aggregate of the amounts                            
            determined by petitioner’s claim department to represent the                               
            company’s total exposure for each claim.  Upon receiving a claim,                          
            petitioner’s claim department conducts an investigation to                                 
            determine petitioner’s potential liability and damages resulting                           
            from the claim.  Based upon this claim investigation, petitioner                           
            establishes a case reserve.                                                                
                  During the years in issue, petitioner reserved a minimum of                          
            $15,000 for each claim when it was received.  Petitioner seeks to                          
            estimate its exposure for each claim more firmly by reviewing                              
            each claim at least three times shortly after it is reported (15                           
            days, 45 days, and 100 days after being reported).  Ultimately,                            
            petitioner closes approximately one-half of all claims received                            
            without making any payments.                                                               
                  The case reserve includes two components:  Indemnity and                             
            expenses.  The indemnity component of the case reserve includes                            
            judgments, settlements, and plaintiff’s attorney’s fees.  The                              
            expense component of the case reserve includes fees charged by                             
            an attorney retained by petitioner to defend claims and all                                
            expenses incurred by petitioner or with petitioner’s consent in                            
            the investigation and negotiation of any claims.                                           

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Last modified: May 25, 2011