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THINGS THAT GO BUMP IN THE NIGHT IN LAW PRACTICE RISKS – CLAIMS

11/2/2016

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     People regularly get injured in their own homes, so you well know that there is risk in anything as simple as getting out of bed.  The well-advised person always takes reasonable precautions to reduce the risk of harm.  Lawyers likely need either a carrier or someone in house to regularly remind them to do the extra things to protect themselves in their law practice as they bolt about in the normally hectic practice day.  If they do not, claims abound.

     Over the last twenty years, firms have recognized the value of loss prevention of those claims in firms and often designate one or more lawyers to serve in the capacity of General Counsel, as a lawyer to the firm.  Aon, a carrier in the errors and omissions field for lawyers, did a survey of various General Counsel to see what was waking them up at night.  “The Aon General Counsel Survey” Summer 2016.  Their top ten list included:

                        Conflicts of Interest
                        Data Security
                        New Business Intake
                        Mistakes
                        Outside Counsel Guidelines
                        Issues arising with Lateral Hires
                        Client Pressures
                        Malpractice Claims
                        Aging Lawyer Issues
                        Document Storage and Retention
 
 
     That listing alone shows how many different areas of a practice presents risks in the modern law firm.  Some did not even exist a few years ago, but now can rise to a potential firm ending event.  So, lawyers need to do excellent work, in accordance with all ethical rules, and likewise do risk control in every phase of their own work.  It is now more than just good quality control of your legal product – it is self-protection.

     Chuck Lundberg in his recent “Quandaries and Quagmires: The Hottest Law Firm Exposure Issues” points to two issues rising to the top in concerns for firms:

          • Cyberliability/data breach and the view that firms will have to deal with a data breach emergency.
 
          • Client imposed retainer agreements and the trend to impose far more duties upon the lawyer relationship than the rules required.
 
 
     Claims against lawyers trend with social and economic events, but it takes time to study them.  Another carrier for large firm lawyers, ALAS, looked at trailing claims, from 2011 to 2015.  They noted how volatile lawyer liability could be and saw how much the value of claims, and the needed resources to deal with them, had increased in recent years.  Mistakes of all types were leading causes followed by stinky clients, conflicts of interest and lawyer misconduct.

     Areas of law come and go as hot areas for claims.  Litigation claims, often driven by mistakes like missing deadlines, have blossomed in recent years.  Corporate, securities and real estate have started to trend down somewhat in a big picture view.

     The thing ALAS noted was that long-standing, high-performing and usually claim-free firms were getting big claims, despite their good history.  It proves the point that loss prevention in law firms must never sleep.  A strong program with enforceable teeth in it and a culture of doing the right thing is required.  Claims will happen but a firm of any size that is educating its staff and lawyers, coupled with good checks and balances, stands a much better chance than others.  For the non-interested lawyers, I always describe it as keeping the post-tax income rather than seeing it slide off the table with a claim.  They need to work as hard to preserve firm income as they did to earn it.

 
 









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    Author

    Steve Crislip was the General Counsel and Loss Prevention Member to a 11 office and 7 jurisdiction law firm for 10 years and has been defending lawyers and firms for more than 25 years and litigating for 40 years.
    These articles reflect lessons learned for Law Firms.

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