What not to do when receiving a legal malpractice claim

When a client asserts a malpractice claim against an attorney, the emotions for the attorney can run the gamut from anger and indignation to sorrow and remorse. However, emotionally charged decisions made in response to the receipt of a claim rarely end well. As a result, a claim that could have easily been resolved or that might have gone away on its own can turn into a costly and distracting fiasco. Sometimes, the reaction to the claim can be worse than the claim itself.

Rather than make a mountain out of a molehill, attorneys can take steps to try to limit their risks and avoid mistakes that will come back to haunt them. Below are five of the most common mistakes made by attorneys when receiving a claim.

Don't Jump to Conclusions

Even in our litigious society, the decision to file a lawsuit is not an easy one. A lawsuit involves costs and time commitment, in addition to some level of confidence that the plaintiff will ultimately prevail on the merits. On the other hand, writing a demand letter to an attorney is easy. Accordingly, attorneys should not simply resign themselves to litigation just because they received a claim.

Indeed, studies repeatedly confirm that most legal malpractice claims are meritless. Clients may threaten a claim to avoid paying a bill or simply because they are unhappy with the outcome of their case. However, neither scenario can by itself support a viable legal malpractice lawsuit in many circumstances. Moreover, even for those claims involving an actual attorney mistake, the mistake alone may be insufficient to support a finding of liability against the attorney. Instead, the mistake typically must have proximately caused damage to the client in order to meet the elements for a legal malpractice claim.

There are also other issues associated with filing a legal malpractice action that may dissuade the client from filing suit. For example, clients who sue their attorneys may waive all of the protections of the attorney-client privilege. Accordingly, when weighing these risks, the client may very well choose to abandon the claim rather than file suit. Thus, it can create additional risk for an attorney to respond to each potential threat of a claim as if it were a full-blown lawsuit.

Don't Fall on Your Sword

In many circumstances, an attorney's ethical obligation to keep clients informed may require disclosure of a mistake when one occurs. However, there is a fine line between the duty to report facts material to the representation of a client and admitting legal malpractice that may virtually assure that a lawsuit follows.

Attorneys who fail to timely report mistakes can face significant risks, including the tolling of the statute of limitations, exposure to a conflict of interest claim (based on a potential conflict between the client's interests and the attorney's interests), and bar grievances. In addition, failure to report an error often increases the likelihood that a client will not just assert a claim but will also take the second step of filing suit against the attorney. Further, the concealment of a mistake from the client typically will not sit well with a jury, and thus plaintiffs' legal malpractice attorneys may be additionally motivated to file suit.

However, at the same time, admitting legal malpractice can have serious consequences, especially when a mistake may not actually meet all the elements of legal malpractice. Such admissions can make defending the lawsuit on the issue of liability very difficult. Less obvious, however, is that an admission may constitute a violation of a "no admissions" clause that can be included in legal malpractice insurance policies.

To avoid these issues, many attorneys will simply communicate the objective facts to the client without reaching the ultimate conclusion of whether those facts constitute legal malpractice. Indeed, there have been instances of attorneys admitting that they committed legal malpractice upon the discovery of a mistake, even though legal malpractice had not actually occurred.

Because this can be difficult in practice, attorneys may wish to consider consulting with another attorney before reporting to the client, such as the in-house general counsel of their firm or outside counsel. An objective view from a disinterested attorney can save the attorney from creating a problematic situation.

Don't Bury Your Head in the Sand

While some attorneys overreact to potential claims, others simply choose to ignore the problem and hope that it will go away. This strategy can also lead to problems.

Another approach is to address the clients' dissatisfaction to the extent possible, including by providing the client with a copy of their file and by responding to any client inquiries. In addition, it may be appropriate to ensure that the notice is given to the attorney's legal malpractice insurer.

Think Before Suing the Client

Often, a client with a potential legal malpractice claim is also a client who has not paid the attorney's fees. Some attorneys see this as an opportunity to win the race to the courthouse by filing their own lawsuit against the client to recover the unpaid fees, so that the attorney can control the beginning of the lawsuit. However, that approach may make a potential legal malpractice claim into a reality, in addition to the out-of-pocket expenses associated with the filing.

Certainly, there may be reasons unique to a particular situation that would justify the preemptive filing of a lawsuit against a client. However, unless the client's claim is truly little more than an excuse to avoid paying fees, initiating litigation with a client can be a risky move.

Get the Insurer Involved

For some claims, an early settlement offer can avoid protracted and costly litigation.

However, if settlement is being discussed, it may be necessary to involve the legal malpractice insurance company, as many legal malpractice policies prohibit an attorney from making a settlement offer without the insurance company's consent.

The risks of failing to obtain the insurer's consent can be significant. Indeed, even if the proposed settlement is within the firm's deductible, making a settlement offer without the insurer's consent could jeopardize coverage for the entire claim.