A recent survey of legal malpractice claims shows that claims are on the rise and payouts have increased. That spells coverage problems for lawyers facing legal malpractice claims or potential legal malpractice claims.
The survey was conducted by professional liability insurance brokers Ames & Gough, who gathered data from Insurance companies insuring approximately 80% of the top 200 law firms in the United States, along with data from many mid-size and smaller law firms. Besides the number of claims being on the rise, the surveyors noted that the amount of money paid out in claims reached new heights, including one payout in excess of $150 million, and two settlements which exceeded $250 million.
This spells trouble for law firms, both in the form of higher premiums, less coverage, and more difficulty getting legal malpractice insurance companies to cover the onslaught of claims. The surveyors indicated that business transactions led the way in generating significant lawyer liability, but that conflicts of interest and wandering outside the scope of services created a slew of legal malpractice problems.
Two lessons of vigilance are evident from the uptick in claims activity and payouts. First, be very clear about the scope of the services for which you as a lawyer are engaged to represent the client. Make the scope of services clear in your engagement letters and do not go beyond scope of the engagement to be “of service“ to your client, or just to generate extra fees, without making sure the scope of your engagement is amended in writing.
Second, document activities of any import in writing. Clients often have selective memory about what occurred on phone calls or in meetings, in connection with representations they made to their attorneys or advice they received from their attorneys. Contemporaneous written documentation is always your friend, and failure to do so when disputes with clients arise is almost always your enemy.
If you have any questions or concerns regarding a legal malpractice coverage claim or a potential legal malpractice coverage claim, feel free to contact us.
Evan S. Schwartz
Founder of Schwartz, Conroy & Hack