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    Managing Risk: Taking Down the Shingle: Sole Practitioners Need Written Contingency Plan

    Everyone is counting on you. What if something happens? Find out how sole practitioners can create a safety net for their practices. This column is the second in a series, "Taking Down the Shingle," that addresses liability issues related to interruptions in law practice.

    Ann Massie Nelson

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    Wisconsin Lawyer
    Vol. 77, No. 8, August 2004

    Taking Down the Shingle
    Sole Practitioners Need Written Contingency Plan

    Everyone is counting on you. What if something happens? Find out how sole practitioners can create a safety net for their practices. This column is the second in a series, "Taking Down the Shingle," that addresses liability issues related to interruptions in law practice.

    by Ann Massie Nelson

    Ann Massie 

NelsonAnn Massie Nelson is a regular contributor to Wisconsin Lawyer and communications director at Wisconsin Lawyers Mutual Insurance Co.

    Lawyers routinely advise small business owners to write contingency succession plans, but rarely do lawyers take their own advice to heart in this regard. When asked on their professional liability insurance application "Who would be responsible for your practice in the event of your absence?" sole practitioners frequently respond, "My spouse."

    Expecting your nonattorney spouse or adult children to maintain or close your solo law practice creates an unreasonable burden for your family and does a disservice to your clients and staff. Furthermore, clients who are harmed by your failure to plan for your own absence may file a legal malpractice claim up to six years from the date the negligence (or perceived negligence) is discovered, regardless of when the legal representation took place.

    Entering into an agreement with another lawyer or law firm to substitute for you and handle your practice in your absence can help you reduce your professional liability risk and fulfill your responsibilities to provide competent representation, act diligently, communicate, and maintain client confidences.

    A more immediate benefit is the peace of mind that comes with the knowledge that you have a fallback plan. The burden of "everyone is counting on me" is a little lighter.

    Develop a Contingency Succession Plan

    Following are some suggestions for developing your contingency succession plan for your solo practice.

    Identify another sole practitioner or law firm to handle your law practice in your absence. You are the best person to decide whom to appoint as "guardian" of your practice. To protect your practice, you will want someone who:

    • shares your values
    • knows your area of practice well
    • can uphold a long-term commitment
    • can preserve the value of your firm's assets.

    In short, you want someone you can trust to do the job right.

    The challenge for sole practitioners who practice in rural areas or who have narrowly focused practices is finding colleagues who are knowledgeable about their practice area but not disqualified by conflicts of interest. If that is your situation, you will need to look outside your immediate location. Tap into your network of State Bar and law school colleagues or consult the Lawyer-to-Lawyer Directory, which appears in the annual Wisconsin Lawyer Directory.

    Negotiate a written agreement with the designated colleague. Your agreement will need to address:

    • Circumstances under which the contingency plan will be executed. How will your designated colleague be informed? Who will determine if you are incapacitated? What criteria will be used?
    • Clarification of the designated lawyer's role. Will the other lawyer provide triage only, or will he or she serve as substitute counsel? Is the designated colleague representing you or your clients? What are the ethical obligations of the substituting lawyer in either situation?
    • Access to your office procedures manual, calendar, docket, contact information, and accounting records. Could another attorney walk into your office tomorrow and know where to begin?
    • Immediate notification to current clients. Include a sample letter to notify clients of your absence, encourage current clients to seek other counsel, and instruct them on how to pick up their files. Some clients will need to file substitution of attorney documents.
    • Notice to former clients, other attorneys, the courts, regulatory agencies, banks, and suppliers. Again, a sample letter in your agreement will help the substituting attorney more quickly get the word out to those who need to know.
    • File access and storage. Former clients should be contacted and asked to pick up their files. Because the long tail of liability follows you indefinitely, the designated colleague ideally would keep a copy of closed files. Consider how and where your closed files will be stored.
    • Fee agreements between you and the substituting lawyer. How will the substituting lawyer be compensated for his or her time spent closing your practice? How will accounts receivable be handled?
    • Trust account and bank account access. Do you need to authorize your designated colleague as a cosigner? Under what circumstances can someone else access your accounts or distribute funds?
    • Valuation process for selling your practice. How will the tangible assets and goodwill of your law practice be valued? How will the proceeds be distributed?
    • Instructions for continuing your professional liability insurance coverage. An extended reporting period endorsement, commonly referred to as a "tail," can be exercised by your personal representative, typically within a year of your death or permanent disability. This endorsement is not a new policy; it simply extends the time to report claims under your current policy.

    Ask clients' permission up front - while you can. Describe your contingency plan to clients in your engagement letter or fee agreement. Ask for their permission to give the designated colleague access to confidential information when necessary.

    This shows conscientious foresight and clears the way for your colleague to step in at a critical time without jeopardizing his or her own ethical duties. In an article that appeared in the January/February 2000 issue of GPSolo, published by the ABA's General Practice, Solo & Small Firm Section, Marcia L. Proctor suggested the following language:

    "In the event that I become incapacitated or otherwise unavailable to handle your representation matter to completion, please be advised that I have made arrangements with [backup lawyer] of [name of firm] law offices to complete the matter. If you have objections to [backup lawyer's] participation, or if [backup lawyer] is unable to handle the matter at this time, [backup lawyer] will arrange for other counsel to handle the matter. [Backup lawyer] will not receive any information about your representation until and unless (1) I become unable to proceed, (2) you consent to [backup lawyer's] representation, and (3) [backup lawyer] is able to handle the matter at such a time."

    If the Worst Happens

    If a Wisconsin sole practitioner dies, disappears, or becomes disabled without a contingency arrangement, the Wisconsin Lawyers Assistance Corporation, created by the State Bar of Wisconsin, can help. The nonprofit corporation advises the court-appointed trustee attorney and provides professional liability insurance for trustee attorneys through Wisconsin Lawyers Mutual Insurance Co. (WILMIC). For information about the Wisconsin Lawyers Assistance Corporation, call the State Bar at (800) 728-7788.

    Duties of trustee attorneys are addressed in Supreme Court Rule 12.02, "Sole Practitioners; medical incapacity," and SCR 12.03, "Sole practitioners; death or disappearance."