You’ve done all the work and now your client won’t pay. Should you sue for fees or write off the loss? How will that affect your malpractice insurance policy? What other considerations should I make? The bottom line – when you sue clients for fees, you are potentially opening yourself up for a malpractice counter claim, especially if there is an opportunity for the client to complain about an unfavorable outcome. Let’s face it. Aren’t soured relationships usually the result of unmet or unrealized expectations? We see this in our agency on a regular basis! At the end of the day, this is boils down to a business decision. In some instances the firm simply must take the appropriate action to recover money that is due. In this scenario, we strongly recommend to have another attorney independently examine the file in advance of suit. With a fresh set of eyes, are there any areas that the former client could bring up that would be problematic? Is the other attorney able to identify areas of inattention or miscommunication that could rear its ugly head down the road?

There are many “hidden” factors the attorney must account for before filing suit. In addition to your most valuable commodity, TIME, are you ready for the other indirect costs associated with pursuing this course of action?  If applicable, what do your partners think as they may inadvertently be affected when it comes time to renew next year’s malpractice policy?  From an insurance perspective, there are two issues that come to mind. Filing multiple suits for fees can not only impact current premiums but could also affect future insurability. Some carriers may put an exclusion on your policy that would not provide coverage for counter claims. Is this suit really worth it? And if you don’t fall into any of these traps the client may swing back with a BPR complaint which can make life complicated for the attorney as well. Our advice – there are many less drastic alternatives available such as arbitration and mediation. Life is too short to go after clients, compromise and move on!

Suits for fees are one of the leading causes for legal malpractice claims and ethical complaints across all carriers and a high frequency of this activity oftentimes will make an underwriter nervous. Find a good agent who specializes in malpractice insurance for lawyers and get their feedback. At the end of the day, please proceed with caution.

Written by Graham Swafford

Probably one of the most frequently asked questions we get from the many law firms with whom we work with across Tennessee relate to determining the appropriate limit they should select for their lawyers professional liability insurance policy. Upfront disclaimer- this is more art than science, and the formula we recommend is certainly not a one size fits all. Our friends at PLUS (Professional Liability Underwriting Society) have suggested the following 2 step formula that typically works well with law firms big and small.

Step 1: Take your 3 largest clients – if you were to have that proverbial error, act or omission that resulted in a damage to your client, what would that damage be for each of your 3 clients?

Step 2: Take the sum total of that amount, and take 80% of that number. Whatever this number is should be the firm’s limit.

Written by Graham Swafford

One of the most common questions we receive from the many Tennessee law firms with whom we work center around why their premiums continue to rise year after year. In most cases, there have been no claims reported and the areas of practice have not changed in drastic fashion either. This has been the source of much confusion and frustration. We have even had attorneys’ tell us they feel singled out by these large faceless insurance companies located in faraway places!

I always compare this to my experience in purchasing life insurance. The first time I ever purchased life insurance, I was in my mid-twenties. I could purchase millions of dollars’ worth of coverage, and it didn’t cost much. I never knew my life was so valuable! Fast forward 10 years. My wife and I now have a 4 year old princess, a 1 year old baby boy, and a dog named Action Jackson. While we don’t have the white picket fence we’re Livin’ the American dream! Imagine my shock and dismay when we re-evaluated our life insurance last year. Premiums were significantly higher in my mid-thirties (when, in my opinion I need this valuable coverage much more now with above mentioned obligations). This isn’t rocket science, folks! I’m a lot older now, my health isn’t quite as good as it was 10 years ago, and I fly airplanes on a fairly regular basis. Also, none of my clothes fit from 10 years ago. At the end of the day my life insurance company is taking on a lot more risk now than from 10 years ago. They are charging a premium commensurate with that higher risk.  The same idea applies to my lawyers’ malpractice insurance carrier. The good news- unlike my life insurance, malpractice insurance premiums tend to level off at the 5 year point (five year being from the point coverage starts, so is possible that an attorney with a major law firm for 10 years starts a solo practice. In this scenario, in most cases, the five year clock would reset despite the fact that said attorney has 10 years’ experience)

Written by Graham Swafford

Lawyers’ Professional liability insurance policies, by their very nature are “claims made” policies. There are two critical dates we will discuss here as it relates to ensuring that the error, act or omission you made would be covered. One of the most important provisions in this type of policy deals with when a claim should be reported to the carrier. When a covered claim is first made during the policy period, this must be reported to the company during that same policy period. Think it may not turn into anything and you’ll wait and report later if it does? DON’T!  Failure to report the wrongful act, error, omission, etc. during that policy period could potentially jeopardize future coverage. Once you are made aware of a claim, bar complaint, grievance, etc. the policyholder must report immediately. Not sure if the event is reportable? Find a good agent who specializes in malpractice insurance for lawyers and ask!

Another important date an attorney should familiarize themselves with is the retroactive (or prior acts) date. The retroactive date establishes the point in time which any error, act or omission would be covered. Coverage would not be triggered if the alleged error, act or omission occurred before that time. It is important that as your lawyers professional liability policy is renewed each year, steps are taken to preserve that “retroactive date” In this day and age where an attorney may go from firm to firm, it is imperative they make sure coverage exists for any potential claims that may arise from previous legal work performed on behalf of a former firm. In most cases, the attorney would be protected from work done at a prior firm on their policy if the former firm has had continuous coverage. In the event the old firm has dissolved or closed their doors they would have an opportunity to purchase TAIL coverage.

Written by Graham Swafford

1. Remind your staff that having a good relationship with the client is the best preventative measure that can be taken against malpractice, and that they are critical to this relationship. Encourage your staff to treat clients as though they were guests in their own homes, including greeting every guest, and offering a smile and a cup of coffee. Also remind staff to answer phone calls quickly and professionally.
2. When meeting with a client, ask your staff to hold your ca lls, and then give your full attention to that client. Challenge yourself to do as much listening in the meeting as you do talking. Ask your client if they have any questions and make them feel like they are your only client (no checking your watch or your smart phone).
3. Turn on the out-of-office feature on your e-mail if you plan to be out for even just half a day. Ensure that the auto reply has adequate instructions for how your client may reach someone who can help them while you are away.
4. Whenever something significant happens affecting a client’s matter, send a status report and follow up to confirm the report was received and understood. Afterwards, inquire whether any other legal matters have developed that you could assist in.
5. Develop a list of firm contacts to give to new clients. I nclude any firm employee that they will need to know and how to reach them. When you provide them the list, also ask them how they prefer that you contact them.
6. Surprise your staff with gift cards or a catered lunch when you see them go above and beyond for a client or if they consistently assist you with providing great client relations.
7. When a matter has ended, send a thank you note to your client, in addition to the disengagement letter, to let them know how much you appreciated their business. Include a few business cards in the envelope to allow them to easily recommend you to their family, friends and colleagues.
8. Don’t make your client have to refer to a legal dictionary to navigate your correspondence. Use plain language and short sentences to make every communication as clear as possible.
9. Survey your clients to see how they feel about your firm. Ask them to identify ways that you could improve. Use the information from the survey to better understand your clients’ needs.
10. Inform current and former clients of new laws or cases that could affect them or their businesses, even if a new development is not relevant to matters currently being handled. You can add a personal note to the letter explaining the law’s specific impact on clients who will be more directly affected

Reprinted with permission from Attorney Protective. First published in AttPro Ally Issue # 12/10/14