Mitigating Professional Liability Claims in Your Law Practice

Maintain your reputation, your practice, and hopefully your sanity.

As a professional liability attorney, I’ve noticed an increasing trend over the last few years. Attorneys, plaintiffs and insurance companies are litigating a much higher percentage of claims, regardless of whether the situation could have been repaired or mitigated pre-suit. Before you launch off into litigation, think twice about the longer-term impacts and at least investigate alternatives.

You’ve heard the story before.

Lawyer A makes a mistake that for some reason is not reported to the client. The court dismisses the case, and Lawyer A walks away. The client reads about the error in the court order or Appellate Court opinion, and hires legal malpractice Lawyer B. Lawyer B then sends out a demand letter. Maybe the client even files a Bar complaint. Lawyer A dumps the letter off to the insurance carrier. The policy’s notice requirements are met, so end of story. Maybe – or maybe not.

Ten years ago, sending a demand package would trigger at least a good faith pre-suit settlement discussion in a majority of claims. Today, insurance companies and defense counsel take a more aggressive “litigate at all costs” stance. It could be the weaker economy, as plaintiffs still have claims but can’t necessarily afford the time and litigation expense. It also could be a shift in insurance carrier policy, as they look at the total cost/benefit of each claim as it relates to their bottom line.

Mitigating claims can mitigate impact to your reputation and practice

Regardless of the reason, claims today are much more likely to impact your reputation. In addition to the increased probability of a public lawsuit, more clients are using social media to publicly broadcast their complaints. Unfortunately, once such complaints are placed into cyberspace, it is very difficult if not impossible to reverse. Why don’t more lawyers and insurance companies try to repair or mitigate claims before they result in a lawsuit or internet complaint? Again, there’s no one magic reason:

• It could be more expensive overall then just settling. Whose best interests are being considered?
• Insurance carriers can inflate their loss reserves, which could be important when asking the State’s Insurance Commissioner for rate hikes.
• It could be the responding attorney’s ego and arrogance. It wasn’t our fault. The case was bad anyway!

Admitting your mistakes

A mistake is still a mistake. If liability is convincing in legal malpractice, the litigation will focus on proximate causation and damages, in trial with a jury potentially making the final decision. Do you really want that? Especially when you are unsure of the extent of damages, trying to repair or mitigate the claim could make the whole matter disappear, or at least be resolved pre-suit so there’s no public record. You may also dissuade the former client from filing a Bar complaint, or at least show that you’ve made positive steps to remedy the issue and thereby mitigating the possibility of disciplinary sanction.

Here are some ideas for improving your chances of mitigating the claim:

• Don’t make mistakes. Just kidding. We’re all human. How you handle your mistakes defines you as an individual and an attorney.
• Check your policy and talk to your agent. Does your insurance carrier proactively engage in claim repair or mitigation activity?
• Notify your carrier. When you make a mistake, follow the notification procedures and requirements in your insurance policy.
• Review Bar Rules. Make sure the client’s best interests are protected.
• Notify the client. You may find it beneficial to include carrier participation.
• Seek personal counsel. Ensure that someone is helping to protect your best interests, especially where there are coverage issues or the claims exceed the policy limits.

If you ever do get involved in a claim, keep your ego in check and focus on protection – your client’s best interests, your reputation, and your practice. You may find that, with the help of your carrier and counsel, you can resolve the situation and protect one other item – your sanity.

Douglas Chandler