3 Examples of Legal Malpractice Causes and Suggested Safeguards

We at ALPS have talked for many years about safeguards to implement to protect your firm (and your clients!) from a potential disaster. Although these will be familiar, they are worth repeating because our Claims Team continues to see claims stemming from mistakes that could have been prevented had the insured firm followed these safeguards.

1. Calendaring

Yup, you guessed it. This is the number one reason attorneys face a malpractice claim. Before you skip this topic because you perhaps think this only applies to personal injury attorneys, we are here to point out that calendaring is important in all areas of practice. Of course, personal injury attorneys do face the greatest risk from failure to properly calendar important dates. These include not only the standard statute of limitations, but also the failure to recognize that a special statute may apply in a certain type of case such as when the defendant is a governmental entity. It’s obvious when it is the City or County who is the actual defendant but beware that many entities may be entitled to the governmental tort claim protections such as municipal hospitals, garbage companies, etc. so always check and calendar those very short notice deadlines. Attorneys defending these claims must carefully monitor calendars as well. In recent years we have seen significant claims arising from the insured’s failure to timely file an Answer resulting in a default judgment against the defendant. In litigated cases, particularly domestic relations cases, attorneys have faced claims arising from failure to timely submit initial disclosures, discovery, or disclose experts. Even in business transactions, attorneys have faced claims because they didn’t comply with contractual requirements regarding notice or deadlines to exercise certain contract options. Estate attorneys have faced claims due to failure to timely respond or submit creditor claims in estate administration or failure to timely file estate tax forms resulting in penalties to the estate. Bankruptcy attorneys have faced claims for failing to meet bankruptcy deadlines. Again, deadlines exist in most areas of law so safeguards are important.

Safeguard for the Firm — Establish a process that applies to ALL persons in the firm, not just the paralegals and administrative staff. The attorney must be responsible for determining the proper dates and another person should independently verify the proper dates. It goes without saying that a law firm policy should be to never wait until the last minute to file or act on the deadline. There is no reason that the firm’s date of action can’t be a month or week ahead of time. That way, if something does go sideways, there is time to repair it.

2. Fee Disputes

Yet again, we know you have heard this before, but we see many legal malpractice and bar complaints arising from either suits for fees or a client who feels they were unfairly charged. Of course, attorneys work very hard and are certainly entitled to be paid. We also see claims when the client feels that the attorney left them in the lurch after withdrawing because the client failed to pay.

Safeguard for the Firm — Have a realistic discussion with the client when you accept the representation. Particularly in domestic relations matters it is important to outline the realistic expense and factors that impact the cost of a domestic matter. A realistic retainer is also important and if the client can’t pay, consider declining the representation. If a client starts to get behind do not let it go but establish a payment plan and enforce it and if that is unsuccessful, it is better to withdraw sooner rather than later so the client is not damaged. Do not let the arrears get so large that the firm can’t walk away from the amount owing. The firm should set a limit and mandate withdrawal once that overdue limit is hit. Otherwise, you could be doing unintended pro bono work because it has gone on too long and the court will not allow you to withdraw.

3. Fraudulent Wire Transfers

In recent years we have seen the terrible effects impacting law firms that have been the victims of fraudulent wire transfers. These are situations in which someone’s email is hacked, a fraudster poses as the recipient of the intended settlement or closing funds, provides fake wire instructions to the insured and the insured relies on the fake instruction and sends the funds to the fraudster. The funds are then lost forever. Even worse, your LPL policy is unlikely to indemnify you for the lost funds and a cyber policy may or may not cover this loss either, leaving the firm to pay out of pocket. Firms also face disciplinary action in these situations for failure to safeguard client funds.

Safeguard for the Firm — Institute a MANDATORY process by which no funds are ever transferred without telephoning the intended recipient of the funds (via a telephone number that is not included in the emails) to confirm the actual wire instructions. 100% of the wire fraud cases we have seen could have been prevented had this safeguard been in place. We understand that you are very busy, but this should be followed in every single wire transaction to avoid loss of funds.

We hope that you implement these safeguards so you do not end up discussing any of these preventable situations with the ALPS Claims Team!