Attorneys are at risk for errors & omissions claims – complaints made by clients that allege you’ve made a professional mistake – because they offer expert counsel and advice. Your clients often have a lot at stake (money, time, and emotional investment) during your partnership, which means an undesirable court decision can easily spur another lawsuit. Only this time, it’s directed at you.
In your industry, E&O claims are often called “legal malpractice” claims. Insurance providers might even use the word “professional liability,” but they all mean the same thing: your law firm is being accused of professional negligence.
You know better than most how expensive a lawsuit can be – even if it never goes to trial. What’s worse? According to a 2008 study by the American Bar Association (ABA), nearly 35 percent of legal malpractice claims are brought against firms with only one attorney. Another 30 percent of claims are brought against firms with two to five employees.
Below we discuss the common situations that can spur legal malpractice claims and what attorneys can do to prevent them.
Common Situations That Lead to Legal Malpractice Claims
Legal malpractice is a serious allegation – one that can tarnish your professional reputation. As you may already be aware, many legal malpractice lawsuits turn out to be unfounded. But that doesn’t mean a frivolous claim can’t cost an attorney’s firm time and money.
The best way to prevent claims is to know what you’re up against. Below are the five most common legal malpractice claims filed against attorneys, according to the ABA:
- Failure to know / properly apply law (11.3 percent). These claims allege that an attorney didn’t do her research properly or that she did her research but did not properly apply it to the case at hand. It can also apply to situations in which the attorney fails to recognize the legal implication of known facts.
- Planning error (8.9 percent). These claims allege that, despite understanding all the facts of the case, an attorney made an error in judgment or strategy.
- Inadequate discovery / investigation (8.8 percent). These claims allege that the attorney did not do his job well enough during the discovery / investigation portion of the proceedings.
- Failure to file documents: no deadline (8.6 percent). These claims involve failed filings where there are no deadlines but filing the document would benefit the client.
- Failure to calendar (6.7 percent). This happens when an attorney knows about a deadline but forgets to make note of it, which results in a missed deadline.
Case Study: A Legal Malpractice Lawsuit
In 2011, the ABA commented on a legal malpractice case in which a law firm was sentenced to pay over $100 million to the plaintiffs for restitution and an additional $12.5 million in punitive damages.
The case involved two individuals, Evans and Cagle, who allegedly retained the law firm to “prepare documents to form a new company.” Evans asserted that the law firm helped Cagle use funds from both Evans and the new company for his own personal gain – and that the law firm helped Cagle hide it.
Cagle had been the firm’s client before this engagement, and the law firm asserted that they did not officially represent Evans as a client. As it turns out, the jury decided that the firm and Evans did have a relationship, based on an engagement letter and other evidence.
How Attorneys Can Prevent Legal Malpractice Lawsuits
While some legal malpractice lawsuits are unavoidable, many can be prevented with a few simple steps. Our tips below have been summarized from the Knoxville Bar Association’s website, which offers some practical advice:
- Don’t give casual legal advice. Not even to your friends! It may be tempting to chat about legal matters to a friend over dinner, but if they take that casual legal advice and suffer a loss, they may sue you for the damage. Encourage friends and neighbors who seek your counsel to make a formal appointment and treat their case the way you would with other clients.
- Always assess clients yourself. The Knoxville Bar Association warns that asking a member of your staff to screen a case could be considered “below the standard of care.”
- Manage your calendar. As we’ve seen above, many legal malpractice lawsuits stem from calendar errors. Another percentage is caused by clerical errors. That’s why it’s so important to develop specific calendar protocol within your office. That way, everyone can stay on the same page.
- Don’t procrastinate. Most clients understand that you are busy and cannot be available at their every whim. But do respond to your clients within a reasonable amount of time. When your clients are happy, your firm is less likely to encounter a malpractice claim.
Unfortunately, it may be impossible to prevent all legal malpractice lawsuits. That’s why attorneys can add Malpractice Insurance (aka Professional Liability/Errors & Omissions Insurance) to their small business insurance plans.
For more prevention tips, check out “How & Why to Prevent Malpractice / Professional Liability Lawsuits” on our blog.