Embroker Team September 2, 2022 3 min read

California Law Firms Boomed in 2021

Two people fist-bumping because they are excited that California law firms boomed in 2021

A new survey reports that California law firms led the country in revenue growth at 18% for 2021, above the national average of 14% growth. The survey, featured on Law.com, also shows that California law firms led the market in growth of expenses at 14% and in inventory at 19%. Both are above the growth of the national averages, at 10% and 12% respectively. What does this mean for law firms residing in California and elsewhere? What are the implications for future growth? Weighing in on the topic is Corrie Hurm, experienced legal professional and Head of Claims at Embroker. Below, Corrie provides an analysis:

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What are your takeaways from this survey? 

California law firms, whether located or based in the state, continue to lead the legal market in terms of rates and revenue, which is a result of a combination of demands: from the leading business markets within the state (tech, life sciences), state legal landscape, and aggressive nature of litigation within California. These factors point to continued revenue growth, as well as an increase in the expense of goods. The supply chain issues we are currently experiencing, coupled with the hiring demand in the legal sector, contributed to the rising costs for California law firms to continue to operate in 2021.

What does this mean for attorneys at California law firms? 

California lawyers can continue to drive rate as the demand for legal services continues to increase. However, the current labor market shortage is significantly affecting California-based law firms, which are reporting difficulties in keeping and acquiring associate level talent. The result of this current lack of available legal talent at the associate level is stretching firm resources thin in trying to keep up with the current demand for legal services within the state. While the demand may be there, we are seeing reflected in the legal industry what we see in other industries at the moment: a need for supply in terms of more employees.

Can lawyers expect even higher revenue in the future? 

Possiblyif the demand for legal services continues in California, which I expect it will, then we can expect to see increased growth. Inflation might also continue to drive rates, and combined with ongoing demand, the situation could result in increased revenues for firms. We’re also seeing more and more industries emerging that California law firms can learn more about and get involved in—think commercial blockchain and crypto companies, cannabis companies, and more. These new spaces are developing regulations, and they will need legal counsel.

Further, when lawsuits inevitably arise, as they already have over things like employment practices or IP, these industries will need legal representation. California law firms are well positioned to represent them as a significant number of startups reside on the West Coast. Herein lies the opportunity for California law firms.


What’s the implication for legal malpractice insurance? 

Increased workloads and lack of appropriate staffing, specifically at the associate level, due to the current labor shortage presents opportunities for inadvertent errors, missed deadlines, etc., possibly leading to an increase in claims from firms whose staff are under-resourced. Law firms based in California and other states should review their legal malpractice policies to ensure they have the appropriate and sufficient amounts of coverage.

Legal professional liability California insurance is a good place for firms in California to start. They should also consider risk management outside of their legal professional liability, such as employment practices liability, as they grow in revenue and in staff, workers compensation for hired attorneys and staff members, and cyber coverage for protecting the confidential data of both the firm and its clients.

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