Law firms in the U.S. face a competitive and fast-changing working environment. Yet, according to the 12th annual survey by insurance broker Ames & Gough, the costs of legal malpractice claims are another troubling factor for the profession as they continue to increase.
The survey, released in May 2022, polled 11 leading professional liability insurance companies responsible for insuring 80% of Am Law 100 firms. Of the insurers surveyed, only four had seen an increase in claims in the year surveyed compared to the previous year. However, the size of the claims increased significantly for most insurers. Ten insurers reported participation in a claim payout that exceeded $50 million in the preceding two years. Meanwhile, three paid between $150 – $300 million, and four paid one claim over $300 million.
The frequency and severity of claims may have increased the cost of practicing law. However, some factors are even more severe than the cost of insurance –the stress and cost of defending yourself as a lawyer when called to protect yourself in a legal malpractice claim.
Tips for Avoiding Most Common Legal Malpractice Claims
According to the survey, some areas produced the most significant malpractice claims. These include Trust 7 Estates, Business Transactions, Corporate and Securities, Insurance Defense, and Tax matters. Additionally, the rapid law changes during the Covid-10 pandemic caught many inexperienced lawyers off guard, leading to the failure to communicate changes to their clients concerning the Families First Act; the Covid Tax Relief Act; the Child Tax Credit, and the America Cares Act.
Follow these tips to reduce your chances of facing a malpractice claim:
1. Keep Notes
It’s often more difficult to recall events and prove them without notes. Therefore, make sure you document all attorney-client communications relevant to a case, making it easier to refer to your notes and confirm the details in the future should a dispute arise.
In some circumstances, it’s also wise to confirm the details of the initial discussion, information received, events, and important decisions with the client in writing by email or letter.
2. Screen Clients
Client screening is essential. It might not prevent you from taking on high-maintenance clients, but you can determine which cases to accept or reject with the correct protocol. Additionally, ensuring no conflicts of interest that may lead to liability later is crucial.
3. Learn When to Say ‘No
Learn to say no when something doesn’t sit right about a client. Some of the signs to look out for are:
- When a client has unreasonable expectations and expects favors.
- Someone who complains unreasonably.
- Clients with a history of getting into difficult situations often blame their troubles on others and pose a high risk for malpractice claims against you.
- When you are the client’s third attorney for the same matter, while they maintain their previous attorneys weren’t handling their case correctly.
4. Practice What You’re Good At
Focus on the areas you specialize in to ensure you can handle a case competently. It’s your ethical responsibility to handle the cases you accept well, and your knowledge will prevent you from making any mistakes that could lead to a malpractice claim.
When faced with a case in another area of interest, your client will appreciate a referral to a specialized attorney. In some states, like Pennsylvania, you can receive a referral fee. However, even if you don’t receive a referral fee, it provides referral network opportunities for receiving reciprocate cases.
Furthermore, knowing the law is essential, so maintain your knowledge and keep up with new developments to avoid making mistakes.
5. Use Clear Engagement and Non-Engagement Letters
Clear engagement letters help define the scope of your legal work and expected fees. The engagement letter must identify the client, the legal services you’ll provide, those you won’t offer, all the costs, how they’ll pay, and circumstances for termination from your firm and the client. In a claim against you, you may need to present this document.
If you do not accept the engagement or the engagement is over, a dated non-engagement letter can help you prove the end of the attorney-client relationship.
6. Use a Calendar to Ensure You Meet All Deadlines
Keep an adequately assigned attorney’s calendar on multiple systems to help ensure you’re aware of all the important events and deadlines for every case. You set yourself up for a malpractice case when you overlook things or miss deadlines.
7. Avoid Counterclaims by Not Suing Clients for Fees
Insurers ask you on their application if you sue clients for fees because they know it’s easy for the clients to file a counterclaim in retaliation. What’s more, they get a free lawsuit. So only sue a client for fees as a last resort.
8. Admit Your Mistakes
The Rules of Professional Conduct say that as an attorney, you must disclose relevant information and any mistakes pertinent to their cases to clients. It’s best to consult an attorney or insurer before disclosing a mistake.
9. Show Your Clients You Care
Always act diligently on your client’s behalf to ensure you build a warm client-attorney relationship, reducing the chances of a malpractice claim. Work ethic and communication form an essential part of this diligence. Communicate the progress of each case properly, remembering that clients want to hear the good and bad news.
10. Always Remain Professional
As an attorney, you have professional and ethical standards that you must maintain. Therefore, you need to know all the facts before giving legal advice, so avoid commenting or advising people at social gatherings. Additionally, it would help if you practiced caution on social media.
11. Maintain Good Malpractice Insurance
You are a legal practitioner and cannot avoid the reality that sometimes, a client may consider making a legal practice claim against you. Therefore, you need the correct type of legal malpractice insurance coverage. Since some policies have limitations, choose the right coverage, even if it means spending a bit more.
Finally, act prudently and take the necessary precautions to avoid claims. Therefore, ensure you have the right insurance coverage if needed.
FAQs
What are the most common legal malpractice claims?
The most common types of legal malpractice claims include failure to meet deadlines, mishandling funds or property, breach of fiduciary duty, violation of rules and regulations, inadequate research or investigation, communication problems, conflicts of interest, and unauthorized practice of law. These claims can arise from various legal services, including real estate transactions, criminal defense, family law cases, etc.
