Vol. 77, No. 12, December
Taking Down the Shingle
Retired but Still Liable
This final column in the series "Taking Down the Shingle" addresses
the professional liability of retired lawyers whose names remain on the
by Ann Massie Nelson
Ann Massie Nelson is
secretary and director of communications at Wisconsin Lawyers Mutual
Insurance Co. Previous columns in the "Taking Down the Shingle" series
appeared in the June
2004, and October
2004 issues of Wisconsin Lawyer.
Lawyers who retire from active law practice but whose names remain on
the firm's letterhead may share in the professional liability that comes
from their real or perceived association with the firm.
Terms such as "of counsel," "affiliated," or "formerly associated"
are not precisely defined by the profession or widely recognized by
clients. Even the adjective "retired" has taken on new meanings as more
people leave long-term careers for other opportunities.
Keeping a retired lawyer's name on the letterhead, even in a
figurehead capacity, lends prestige, name recognition, and longevity to
the firm. Likewise, the retired lawyer maintains a presence in the
profession and the community; even if the accoutrements are gone, the
firm continues to be a place to call "the office."
This mutually beneficial association carries with it a need to shield
the firm and the departing lawyer from becoming liable for the other's
errors or omissions.
Organizing as a limited liability corporation and crafting a
carefully worded exit agreement could limit a lawyer's liability.
However, conventional wisdom says that if the client perceives
that a lawyer is a member of a law firm _ as a reasonable person might
conclude if the lawyer's name appears on the firm's letterhead _ then
the lawyer is, in effect, a member of the firm.
When the retired lawyer shares in the firm's profits, he or she
probably will share in the liability, absent a special agreement.
Furthermore, the retired lawyer could be named individually in a
lawsuit, particularly if the firm's available limits of liability are
inadequate. Even if no liability exists, the costs of defending a claim
or resolving a coverage dispute could be significant.
Lawyers who are retiring from private practice and their law firms
need to consider the following precautions.
Name Former Lawyers to the Policy
One way to provide coverage for former partners, shareholders, and
associates is to continue to name them on the application for
professional liability insurance. For everyone's peace of mind, the firm
should send a copy of the declarations page and policy to all lawyers
named on the application every year when the policy is reissued.
The lawyer who retires or leaves the firm must rely on the former law
firm (or firms, in some cases) to maintain insurance coverage with a
reputable carrier and with adequate limits of liability and a manageable
Plan for Future Dissolution
Retired lawyers may have little say about insurance coverage if the
firm later merges or disbands and discontinues its current professional
liability insurance policy. Ideally, the dissolving firm will purchase
an extended reporting period, more commonly known as "tail" coverage,
that names current and former lawyers who performed legal services on
behalf of the firm.
Tail coverage is added by endorsement to the existing policy. The
tail extends the time (usually for one to five years or an unlimited
time period) to report a claim under the current policy. The available
limits of liability and conditions of the policy do not change.
An unlimited tail affords the greatest protection. The statute of
limitation on legal malpractice in Wisconsin is six years from the date
the client discovered (or reasonably should have discovered) the alleged
error or omission, regardless of when the representation occurred.
Questions to Ask
- Ask the following questions before a
lawyer leaves a law firm or before a malpractice claim is made.
- How long will the firm continue to name the lawyer on its
professional liability insurance policy application?
- Will the firm continue to carry adequate limits of liability?
- What provisions will be made for former lawyers if the firm merges
- Who will pay for the individual tail?
- If the firm dissolves or merges with another firm, who will purchase
the tail? How will the tail be funded?
- Who will pay the deductible if a claim is made against the firm or
the retired lawyer? How much is the deductible?
- Will the retired lawyer have access to client files and firm
records, if they are needed for his or her defense?
- Who will authorize defense procedures and settlement
Get an Individual "Tail"
A lawyer might be able to purchase an individual tail endorsement
when he or she leaves the insured firm. Again, the terms of the policy
remain the same; only the time period for reporting claims resulting
from work done on behalf of the firm changes.
A tail may be unavailable, or the insurance company may require
separate underwriting before issuing the tail endorsement. An unlimited
tail can cost 2.5 times the individual attorney's share of the firm's
New Work Requires a New Policy
A retired lawyer who has a change of heart and hangs out a new
shingle will need to purchase a new policy. The new policy may be
assigned a "retroactive date of inception," which means work performed
before that date is not covered.
A returning lawyer who has a tail with a reliable carrier can request
a policy with a retroactive date of inception, which is generally less
expensive than a policy without this restriction. The previous law firm
may wish to specifically exclude coverage under its policy for the
individual lawyer and the lawyer's new entity.
Lawyers who retire from private practice but continue to do
incidental or volunteer legal representation should be aware that work
performed after the date stated on the tail endorsement will not be
covered. Coverage may be available for part-time or "semi-retired"
lawyers who continue to accept new matters.
In either case, the lawyer and the firm would be wise to choose the
same insurance company. This removes the risk of a coverage dispute
between carriers if a claim is made.
Document Dates of Representation
Lawyers remain personally liable for their own errors and omissions
unless they can verify that they withdrew from representation before the
liability was assumed. Accurate time and billing records and letters of
engagement and disengagement _ not just for new clients but also for new
matters _ document the dates representation began and ended and may help
Notify Clients of an Attorney's Departure
While the client has retained the services of the law firm, not the
individual lawyer, the client needs to be notified when his or her
lawyer is retiring or leaving the firm. Clients should be given the
opportunity to select other counsel or to authorize transfer of their
file to another law firm. Law firms need to request a signed and dated
statement from the client documenting the client's decision regarding