Some practice areas, such as personal injury, will incur more than three – and the odds have seemingly increased in the last several years. In fact, malpractice claims in that specialty rose 30 percent, a “staggering amount” based on an analysis of malpractice claims from 2008 to 2011.
Smaller Firms More Prone to Malpractice Claims
Smaller firms tend to have the most malpractice claims. Specifically, firms with between two and five attorneys make up 15% of the malpractice insurance policy market, but account for 32% of the claims. These are the firms, Scott says, that tend to work like a solo firm with the benefit of a small group. These firms tend to be less tenacious about following systems and processes.
It’s not the new lawyers either. New lawyers account for about 7% of total malpractice policies, but report between 3% and 3.5% of the malpractice claims. By contrast, lawyers with 11-20 years’ experience account for roughly 31% or 32% of claims filed, said Scott. The reason for this is that experienced attorneys tend to have more responsibility with time.
Proper Systems Help Reduce Risk
Having a system was a common theme on a recent webinar Scott presented on malpractice titled Safeguarding your Law Firm from Liability (recording).
He also offered eight straight-forward tips for minimizing the risk of malpractice, which were:
1. Avoid trouble with trust accounting.
Financial mismanagement is the fastest path to ethics discipline. Any notion of financial mismanagement can result in severe consequences. Of the claims Scott has managed, he notes, these rarely involved a lawyer but rather a trusted employee that, for one reason or another, gets desperate. Scott emphasized the need for internal controls: for example, the person who writes checks on behalf of the firm shouldn’t also be the person reviewing the bank statements. As an underwriter, he advocates the implementation of financial management software and specifically software designed for attorneys. There are two types of systems: a) those that just do accounting (money in and money out) and those that also provide time and billing, which will enable a firm to write a check off a ledger. Fully integrated accounting brings these two together and is generally desirable for law firms.
2. Simplify and automate client onboarding.
When lawyers step outside their systems, that’s when they get in trouble, according to Scott. Even if a lawyer engages in work for a friend or family member, he advises attorneys to stick to their routine: make them come to the office. Conflict checking is another systematic process that should not be overlooked; in fact, attorneys will need one to underwrite an insurance policy. No matter the area of law in which a lawyer works, conflicts will arise – so have a process to follow.
3. Eliminate the risk of missed deadlines.
Scott says ultimately eliminating the risk of missed deadlines is about good docket control. In his time as a practicing attorney, he would, on average, have between 60-120 open files, each with critical timelines. The type of calendaring that comes standard with common email programs simply isn’t designed to manage this level of detail. Case management software designed for lawyers will be able to both eliminate the risk of missing a deadline and provide great reporting across a range of open files.
4. Close the communication gap.
Communication issues account for about 15% of all malpractice claims. This means 15% of all claims occur not because a lawyer didn’t know the difference between right or wrong, but that the attorney simply hasn’t communicated with a client. Sometimes cases are slow, says Scott, but he recommends checking in with clients regularly even then. When a client goes six months without speaking to their attorney, they tend to see advice “from all the wrong people” and that’s where things start going sideways. The attorney might know a case is on track, but clients don’t always have the same grounded legal perspective.
5. Follow real and virtual paper trails.
Scott offers three main points for securing paper trails: First, clients “misremember” things, which is why keeping good track of documents is incredibly important. It’s important to document conversations and store them centrally, especially when a client isn’t following counsel. Second, as life has gotten more convenient with mobile devices and access to cases from virtually everywhere, attorneys need to be extra careful about the real paper trail, such as forgetting a cell phone in cab. Third, back up your data, and not just in case the server crashes, but in case of a flood or other natural disaster that might damage an office facility. Online back-ups systems have grown in popularity for good reason.
6. Establish a routine and adapt to new technology.
Routine and systems was a common theme throughout Scott’s presentation. However, he also asks attorneys to consider the “vision” for their firm. When thinking about new technologies to support a law practice, be sure not to take on too much, too fast. He recommends attorneys include support staff in any technology decision since the staff will often be using that system, and always budget for service and support.
7. When you grow, find the tools that fit your firm.
There’s a lot of new software out there, but Scott suggests sticking with technologies that are tried and true from companies with a solid track record. Attorneys need to have a reasonable sense of confidence the company they purchase software from companies that “will be around for a while.” As for being first, or among the few to try a new technology, Scott says to “think long and hard before taking that on.”
8. Generate airtight documents.
This comes back to having a consistent process – this time – for creating and saving documents. File name configurations, for example, should be consistent and intuitive. Forms and templates can streamline your practice and avoid the inevitable glitches that come with “cut and paste.” A mix up over words such as “buyer” and “seller” by re-using an old contract to create a new contract for a different client is a likely cause of malpractice cases.
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Many of these tactics seem like common sense, however, Scott has seen claim after claim involving them.
The webinar is recorded and available for viewing at the link above, and an infographic on malpractice, based on ABA survey data, follows below:
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