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HANGING CREPE – A DISCUSSION OF CLAIMS AGAINST LAWYERS

9/2/2017

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     I am told the country expression of hanging crepe refers to talking about really negative or pessimistic subjects.  I then am a true crepe hanger whenever I speak with lawyers about claims made against them in their practice.  I often advance the argument that the best way to defend such a claim is not to have any.  The next best way to resolve the issue is to remove the basis of the allegation.  The last best way is a right proper defense of any such claims against the lawyer.

     A study of trailing claims history is always illustrative to see what is trending.  For years such studies took too long to receive and were not good preventive tools since they were dated by several years.  Our friends at the McLean, Virginia insurance broker Ames & Gough have for the last seven years actively polled nine of the leading lawyer’s professional liability insurance companies to see what they were either reserving, or paying, for in such claims. Their methodology picks up about 80% of the Am Law 100 firms.  While big firm centered, it is very instructive, particularly when compared with similar data of other large insurers like ALAS (mutually owned carrier for well over 50,000 lawyers).

     The modern (last few years) trend has been for the number of claims to level off.  More carriers have stressed the ALAS approach of quality loss prevention trainers for their insured lawyers to get those numbers down.  So level numbers are good, but the severity of the claims continues to rise.  The number of claims and the severity are all still above the years before the 2007-2009 recession era however.

     Conflicts are at the top again in type of claims.  There is no dead horse when you repeatedly preach to lawyers they must avoid conflicts.  They lead the pack in claims because, in my opinion, they are so ­­­offensive and easy for any juror to understand.  They do not see all the recognized legal exceptions we lawyers study and just see divided loyalty. 

     About half of the surveyed respondents noted that conflicts arising from lateral hires are on the rise, as are such hires causing many other types of claims.  Lateral transfers of lawyers can be a good thing, but if not done right you see more claims as reported here.

     My firm obtained very early cyber insurance from this broker and their 2017 study reports those types of cyber claims are also on the rise.  It happens to all using electronics, but lawyers have confidential information, and when it unreasonably gets loose, it presents legal and ethical issues.  So that part of the modern law practice is now a daily battle of the firm defenders against both hackers and human error.  Coverage for these issues is often different from professional liability policies since most only apply to a liability claim arising out of their practice.  Big cyber losses can occur to any firm without having a client claim, and therefore you need to look at cyber insurance.  It is a rising claim area where you could be uninsured.

     Finally, it just costs more internally and for outside defense costs when you have any professional claim of any type, so this goes into the increased severity costs.  So all these things cause me to preach the loss prevention gospel and for me to take you down the country path of “Hanging Crepe”.

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    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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