Author: Mike Shea, President, SGP Advisors
As the economy becomes more and more tumultuous, law firms continue to face higher risks and tougher business decisions. Account receivables are on the rise, collection timelines are lengthening beyond 90 days, clients are stretched thinner and thinner, while at the same time firms are doing everything they can to keep business coming in the door and keep everyone on the payroll. These are some of the most difficult times law firms have faced in history. These are the times when risk management becomes even more important because behind every good client is somebody looking to capitalize and receive financial gain by any means possible.
Here are some simple tips to consider when evaluating your firm’s risk management practice and procedures. Following these procedures does not prevent malpractice claims, but certainly can be used as a guide to educate you on why malpractice insurance carriers ask certain questions. These tools may also help you to indentify practices and procedures to help minimize the threat of a legal malpractice action. These practices become even more important during these difficult times we are currently facing. Now, more than ever, is the time to pay attention to all aspects of your law firm to make sure corners are not being cut and carefully putting quality in front of quantity. Starting with the basics, make sure to have a quality intake form that covers everything ranging from billing and fee arrangements to critical statutes or other time sensitive deadlines. You will want this form to clearly spell out the scope of service(s) and most importantly address any conflicts of interest and attorney/client privilege issues. Knowing how to check for and indentify conflicts or potential conflicts is essential in avoiding a legal malpractice matter. A good client intake form is an excellent first step!
Something that is most important during these tough economic times and relating to my previous comments is accepting clients and/or cases. Here are a few things to consider before engaging with any new client or taking on a new case. First and foremost, beware of clients who are changing attorneys or have unreasonable expectations. Trust your instincts, if you impression of the client or the case is unfavorable then more than likely you are correct. ALWAYS decline any representation in writing. Be sure to avoid giving any recommendations or opinions on the case and include any statute of limitation dates if applicable. We have seen it time and time again when a client brings a suit against a firm because they believed they were representing them. The last thing you want is to be set up by a potential client relating to a case you never accepted in the first place.
How is your docket and case management system? There are many technologically advanced programs available these days that range in all sorts of capability and affordability. I can assure you that this is vital for maintaining control of your practice. Timely and accurate communication with your client is a key component to case management as well. Here are a few procedures to consider implementing if you have not already done so and if you have now is a good time to review everything. Make sure to have a computerized docket system with a minimum of one paper backup system. It is also recommended to have offsite storage of backup information. Another good practice is to have calendars cross-checked by more than one individual. We all know that sometimes another set of eyes will pick up on something others may not. It is also critical to have a quality training program for your staff on the proper use and management of all office procedures. Studies have shown that the highest percentage of malpractice suits originate from some sort of administrative error. This is something that can be easily prevented with the proper systems and procedures in place.
Lastly, I want to touch on a very common practice especially during tougher economic times such as the ones we have been faced with recently. I am referring to suing your clients for unpaid legal fees. This can be very detrimental for a number of reasons, but most importantly because it sets the table for a cross-complaint for legal malpractice. Just below administrative errors, statistics have shown that the second most common malpractice suit is the direct result of a counter complaint resulting from an attorney suing a client for unpaid legal fees. This gives you an idea of why all insurance carriers look at this as a key underwriting question. If this is common practice in your firm it can surely have a negative impact on your premium as well as affect your insurability. Trust me, I understand that sometimes it cannot be avoided, but here are a few things to consider before going down that road. Take into consideration the cost of litigation and the time involved. Make sure to consider the possibility of a malpractice countersuit. Also, consider the factors in collecting the judgment. As a preventative measure some firms utilize a procedure of collecting higher retainers, or a series of follow up letters with periodic billing. Some will use a collection agency to pursue the matter before filing suit. A final step, assuming you meet all ethical obligations, is simply withdrawing from representation.
There is no doubt as a part of human nature that we are all prone to mistakes from time to time during our professional careers. Some of these can be prevented and some simply cannot. I hope you will consider this information as a valuable tool to improving your practice and maybe helping prevent a simple mistake. You may just alleviate the burden of a malpractice suit walking in the door. I am hopeful this will also provide some insight into the questioning on malpractice insurance applications. There is no doubt that times have been tough for law firms over the past few years, but that does not change the risks associated with your practice. It actually magnifies these risks. Although now may be a time when you need to scale back certain things, make sure you keep all these things in mind as you do so because risk management is more important to your practice than it has ever been.
Author: Mike Shea, Thaxton Barclay Group, 100 N Tampa St. Suite 3530, Tampa, FL 33602. Thaxton Barclay Group specializes in the evaluation, assessment and placement of professional liability insurance and risk management for law firms.