United States: You're Facing A Malpractice Claim; Don't Make A Bad Situation Worse

Last Updated: December 28 2017
Article by Shari L. Klevens and Alanna Clair

Receiving a legal-malpractice claim threatening potential litigation can be scary. While many attorneys take steps to avoid such claims, few have a plan for what to do after they receive one. Reviewing any applicable legal-malpractice policy is a good place to start to identify an attorney's obligations and formulate a plan, but there are additional considerations to address.

Sometimes, attorneys respond to claims in ways that complicate the situation and make it hard to avoid litigation. Indeed, an early misstep may increase risks of significant exposure and defense costs. Here are four points that attorneys can address early when faced with a legal-malpractice claim to avoid making a bad situation worse.

Not Every Mistake Is Malpractice

An attorney's duty to keep clients informed generally includes a duty to self-report material mistakes impacting the representation. However, there is a fine line between reporting "just the facts" and admitting legal malpractice. The former may help meet an ethical obligation, while the latter may lead to a malpractice claim.

Attorneys who fail to timely report material mistakes may face significant risks, including the potential tolling of the statute of limitations, possible exposure to a conflict of interest claim (based on the conflict between the client's interests and the attorney's interests), and in some cases, bar grievances. Further, concealment of a material mistake from a client may only give a client and malpractice counsel more incentive to file suit.

On the other hand, there may be serious consequences for attorneys admitting legal malpractice when malpractice has not occurred. Obviously, such admissions can make defending the lawsuit on the issue of liability very difficult. Less obvious is that an admission can constitute a violation of the "no admissions" clause of the typical legal-malpractice insurance policy, negating insurance coverage.

Indeed, as a matter of law, a mistake made in an attorney-client relationship does not equal liability for legal malpractice. Data confirm that many legal-malpractice claims are without merit. Elements of duty and causation, among others, impose a significant burden on a plaintiff to prove much more than just the existence of a mistake. However, an attorney who tells a client that a mistake constituted malpractice may create liability where none otherwise existed.

In practice, it is prudent for attorneys to timely report any material adverse development in a representation to the impacted client, also disclosing whether the development arises out of the attorney's action (or inaction). An attorney can advise that there has been a mistake, but stop short of conceding any malpractice. Because the line is so fine, attorneys may also consider consulting other counsel before reporting to the client. An objective view from a disinterested attorney can save a lot of defense costs and exposure.

A Claim May Not Lead To A Lawsuit

Attorneys can try not to overreact to a client asserting a claim. A client expressing dissatisfaction with a representation or threatening a suit does not mean that such a suit will happen. Indeed, clients may threaten a claim because they are unhappy with a result or want to avoid paying a bill. Neither scenario necessarily supports a viable legal-malpractice lawsuit.

Along with a heavy legal burden, financial and other pressures may also prevent a client from filing suit. Some states, like Georgia, require expert testimony, including an affidavit from an expert, prior to filing a legal-malpractice complaint. Therefore, early on, a plaintiff must present proof of some negligent act or omission and must incur expert fees upfront.

As a result, it is prudent for attorneys receiving a claim to maintain a level head in assessing the strength of the claim and the likelihood that it will lead to litigation. Outside counsel can assist with this analysis.

Ignorance Is Not Bliss

At the other end of the spectrum, ignoring a legal-malpractice claim will not make it go away. While some attorneys overreact to a potential claim, others ignore a claim in hopes that the client's mind will change. This strategy is rarely effective.

Ignoring a claim may also put the attorney's legal-malpractice coverage at risk, particularly if the policy requires notice of claims or potential claims. Malpractice policies often require insureds to provide notice of any circumstance that might give rise to a claim. Even if a client has not yet initiated litigation, the threat of a claim may warrant reporting. Further, many policies provide coverage based on when a claim is reported to the insurer. When the attorney provides notice may control whether the claim falls within a policy's effective dates. This may be significant where there has been a lapse in coverage or where multiple policies could apply.

Any Resolution May Require Insurer Consent

Attorneys can consider early settlement opportunities for a malpractice claim prior to the filing of a lawsuit, especially if the amount required to settle is de minimis compared to the costs and exposure of the claim. However, the typical legal-malpractice insurance policy prohibits an attorney from making a settlement offer without the insurance company's consent.

If the applicable policy contains such language, efforts to settle a malpractice claim may need to be coordinated with the attorney's insurance company. The risks of failing to do so are significant and could leave an attorney without coverage for the claim.

A malpractice claim is a negative situation but does not need to turn into a nightmare. An attorney receiving a malpractice claim can soften the blow by facing the situation promptly and considering the issues above.

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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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