November 28, 2016

Ways to avoid legal malpractice, as claims rise industry-wide

Most people, including lawyers, on hearing the word malpractice, associate it with the medical profession.

Yet law firms have seen an increase in the frequency of malpractice claims. According to a study by insurance broker Ames & Gough released earlier this year, legal malpractice insurers saw an increase in the frequency of new claims in 2015, including larger claims with costs in excess of $50 million.

Business transactions triggered the largest claims, but real estate and trust and estates areas were also areas of contention.

To help attorneys be better prepared for this inevitability — 4 out of 5 lawyers will have at least one malpractice claim during their career — the ABA Law Practice Division presented the webinar “Avoiding Common Malpractice Missteps: What Every Lawyer Needs To Know.” The session was moderated by speakers Dan Pinnington, vice president, Claims Prevention & Stakeholder Relations, LAWPRO, Toronto, Ontario; and Mark Bassingthwaighte, Esq., risk manager, ALPS Corporation, Missoula, Mont.

LAWPRO (Lawyers’ Professional Indemnity Company) is an insurance company licensed to provide professional liability insurance and title insurance in jurisdictions across Canada.  ALPS Corporation and its subsidiaries provide professional liability insurance products — malpractice, cyber response, etc. — for lawyers in the United States.

Longtime legal practitioners might be surprised to learn that the number-one problem leading to malpractice claims is “poor lawyer-client communication,” Pinnington said.

“Over the last 11 years, by cost and count, more than one-third of LAWPRO claims involved this type of error – almost $22 million or close to 7,200 claims,” he said.

According to the panelists, the causes of claims from 1997 to 2007:

  • 36 percent of claims are miscommunications and delays with clients
  • 17 percent arise from time management and deadlines
  • 15 percent come from inadequate discovery (not understanding the client’s needs and desires)
  • 13 percent from failure to know the law
  • 6 percent from conflict of interest
  • 5 percent from clerical errors
  • 8 percent other

Regardless of whether a firm is solo, small, medium or large, more than one-third of claims were related to poor communications or miscommunication.

“This is a profession-wide issue,” said Pinnington, noting that there are three types of communication-related missteps — failure to follow a client’s instructions, failure to get a client’s consent or to inform a client and failure to fully and completely explain information and administrative issues to a client.

Bassingthwaighte said that the U.S. has a comparable situation traceable to the same flaws in communication.

Malpractice claims related to communication often emanate from failure to follow a client’s instructions because “lawyer and client disagree on what was said or done — or not said or done,” Pinnington said.

Poor communication goes beyond talking to a client or having a written document outlining a legal service. It also often involves failure to apprise a client of certain administrative issues such as the timing of steps on a matter, or fees and disbursements.

Said Bassingthwaigthe: “The number-one complaint is, ‘My lawyer isn’t talking to me.’ Who hired who? Make sure your client is kept informed with what is happening.”

Pinnington said that this type of glitch also arises when there is confusion over whether the lawyer or client is responsible for something during or after a matter is settled — for example, sending a lease renewal notice to a landlord or renewal of a registration or filing.

Both Pinnington and Bassingthwaigthe emphasized the importance of having liability insurance.

“It’s good to have an insurer in your corner,’’ said Pinnington, who pointed out that distribution of claims was less than $100,000 in 90 percent of cases.  Bigger firms, he said, have better claims resolutions.

The most important strategy to avoid claims, both said, was don’t dabble.

“There is no such thing as a simple will,” said Pinnington, who recounted the story of a Las Vegas litigator who was asked by several friends to look over a contract.  He did, and the friends lost their shirts.

“You can’t shoot from the hip,” he said, adding that “dabbling starts with good intentions, someone wants to help a family member with a legal problem that is outside their area.” Pinnington said if you want to help, get a co-counsel who has that area of expertise. “And if you do it, set expectations.”

Bassingthwaigthe and Pinnington both recommended a firm-wide master calendar to provide built-in accountability, quality control and system standardization.  Don’t procrastinate, either.  Find the time to document the scope on every file, which will keep you from making assumptions.

Also, a growing area of concern for law firms looking to minimize the risk of a claim is cybersecurity.  Because lawyers and law firms collect and store large amounts of sensitive client data — trade secrets, intellectual property, confidential business dealings and the like — they are a target for hackers.  The larger the firm, the bigger the target.

Increasingly, clients are demanding that law firms ensure that their information is secure.  Look into encryption, the panelists say and, of course, have insurance for worst-case scenarios.