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