What activities are high-risk for legal malpractice? Are there certain practice areas where malpractice claims are more common? An insurance broker called Ames & Gough recently performed an annual survey of professional liability insurers to find out.
The biggest risk factor for malpractice claims is inadequate safeguards against conflicts of interest. Actual and perceived conflicts of interest have been the first or second leading cause of legal malpractice claims each year the survey has been performed.
As we've discussed before, a successful claim of legal malpractice must prove:
1. The lawyer had a specific duty to the client
2. The lawyer breached that duty
3. The client was harmed or injured by the breach
4. The harm included a financial loss
In the case of a conflict of interest, the attorney owes the client a duty of loyalty and breaches it by taking on a competing duty. For example, the attorney might agree to represent a second client whose interests conflict with those of the first.
Certain practice areas generate more legal malpractice claims than others. According to the survey, the areas with the most claims are:
Business transactions and corporate securities. Increased workloads, especially in mergers & acquisitions and corporate securities appear to be driving this trend. Common complaints include scrivener's errors (typos in legal documents), conflicts of interest, breach of fiduciary duty and inadequate representation.
Commercial real estate transactions. Again, increasing volume of work may be driving increased malpractice claims. Common issues include errors on deeds or mortgage documents, weak lease or loan guarantee language, conflicts of interest and failure to properly manage or maintain appropriate escrow fund balances.
Trusts and estate planning. The U.S. is entering a period of enormous wealth transfer from older to younger generations. The increased volume of work may again drive errors and omissions. Also, the inherently personal and sensitive nature of the practice area makes it ripe for client dissatisfaction.
Whenever you choose a lawyer, make sure they have not only the experience and know-how but also the time and resources to handle your legal matter. This includes the time and tools to perform a robust conflict check and to review all documentation for completeness and accuracy.
Beyond conflicts of interest and problematic practice areas, the survey also identified issues with law firms' cybersecurity. With the advent of email, web chats, instant messaging, texting and social media communication, maintaining client confidentiality has become increasingly complex. Ask your lawyer about their plan to protect your sensitive information and whether they have separate cyber liability insurance beyond their regular professional liability policy.