State Bar of Wisconsin

Vol. 74, No. 4, April 2001

Managing Risk
Economic Downturn Means More Lawyer Business, Risk

by Ann Massie Nelson

WHEN THE ECONOMY GOES into a slump, the legal business traditionally sees an upturn. People have a heightened sense of righteousness, and the urge to sue any possible source of recovery is enhanced, according to Ward I. Richter, an attorney with the Madison firm of Bell, Gierhart & Moore S.C.

The same circumstances that prompt clients to retain lawyers, however, can lead to a concurrent rise in legal malpractice claims.

Legal malpractice claims have steadily declined, both in number and severity, during the past few years. "During good times, fewer people look to pin the blame for bad business or legal results on their lawyers," says Melvin G. McCartney, president and chief executive officer of Wisconsin Lawyers Mutual Insurance Co. (WILMIC).

When times are tough, clients will examine the value of a lawyer's work with a more critical eye. Even legal work performed in the past may come under closer scrutiny as clients and third parties attempt to uncover any overlooked sources of recovery.

"Work done in good times comes back to haunt lawyers in bad times," McCartney notes. "Claims against lawyers rise, as well as the costs associated therewith."

While you can't do much about past representation, there are some techniques you can use to reduce your risk of a malpractice claim when the economy goes soft. Richter offers the following recommendations.

Be Selective

Screen new clients and new matters carefully. In an economic downturn, the client who postponed action may come to you just before the statute of limitations runs out, putting you in the difficult position of managing an overripe matter in a short time. Think to yourself, "I can afford to be choosy."

"When you get busy, it's easy to work on the good cases. The ones you think you will win are fun. But if you're not attentive to the other cases - the ones where the clients are difficult or the case is weak - your risk of a malpractice claim looms. You tend to let the bad cases sit and fester until time runs out," Richter says.

Your ability to spot difficult clients may be clouded by your empathy for their situation. People who have been laid off or undergone a cutback in hours may be seething with anger at their employers. The divorce client who needs to renegotiate a child-support agreement will probably be vexed, no matter what the outcome. The slip-and-fall accident that would have been covered by health insurance when the client was employed now becomes a personal injury claim against the property owner.

Be cautious in how you proceed with people who are hurting emotionally, financially, or physically. You don't want their anger or vindictiveness to ricochet in your direction.

Don't Dabble

More and more areas of practice require highly specialized knowledge to provide competent representation. A lawyer who takes a personal injury or medical malpractice case as a favor to a friend or long-term client, for example, may not comprehend the subtle nuances of the law.

One attorney, practicing outside his area of expertise, represented a patient in a medical malpractice claim. The attorney was unaware that notification requirements are shorter for physicians employed by government agencies than for those in private practice. When notice was served too late, the medical malpractice claim became a legal malpractice claim.

WILMIC's claims statistics show a disproportionate number of claims are reported and paid in areas of law where the attorneys rarely practice, according to their insurance applications. "If you don't have the expertise in an area of practice, you need to refer the matter to someone who does," McCartney says.

Market Preventive Legal Service

Encourage clients to seek your counsel before making serious, life-changing decisions, Richter says. Let clients know you are aware of the challenges they are facing. Remind them that preventing legal problems is far easier and less costly than cleaning up mistakes. For example:

• If you represent an employer who is contemplating layoffs, send a letter suggesting the client talk with you first about sensitive questions dealing with age, sex, or race.
• When you see an article or Web site with news related to a client's industry, send a copy with a "thought you would be interested" note or email.
• Help clients identify needs and direct them to other lawyers or professional service providers who can help them. For example, your business client may need to review her personal estate plan. The unemployed engineer may need help exercising stock options. The couple filing bankruptcy may need family counseling.
• Offer a free seminar to the public or to a selected group of clients, when appropriate.
• Engender referrals. In times of uncertainty, people rely on word of mouth to find competent professional services. Make it easy for your clients to refer you to others by making your business card or firm brochure available.

Fine-tune Your Office Systems

Make sure your office procedures are functioning smoothly. Could your office systems accommodate a 10 percent increase in business? A 25 percent increase?

• How adequate is your tickler system? Do you schedule reminders well ahead of the deadline?
• How can you use software for case management, billing, and document assembly to increase your firm's productivity? Are you getting the maximum benefit from the software you own?
• Does your telephone and voicemail system improve clients' perception of your accessibility?
• Does your filing system allow easy and quick document retrieval?
• What standard letters and forms do you have in place for routine matters?
• How comfortable are you asking for a retainer or explaining your billing method?
• Do you bill - and collect - regularly, or do you let uncollected fees go until your service is a distant memory?

Wisconsin Lawyer