As we get closer to the end of 2018, it’s time to take a look back at the most common types of claims reported to Wisconsin Lawyers Mutual Insurance Co. (WILMIC) during 2018 and the riskiest areas of practice this past year.
The good news is that WILMIC has seen fewer claims in 2018. So, lawyers are doing many things right. The areas of law that generated most of WILMIC’s claims were bankruptcy and collections, real estate, family law, plaintiffs’ personal injury work, and estate planning.
Brian Anderson, senior claims attorney at WILMIC, says there have been some changes in recent years. “It used to be that plaintiff personal injury work generated the most claims year after year. That is no longer the case. Bankruptcy and collections is number one this year, family law has crept up the list a little bit, and plaintiff personal injury work has fallen to fourth.”
Let’s take a closer look at some of the issues resulting in legal malpractice claims in these areas of practice.
Bankruptcy and Collections
The most expensive claims to defend in this area of practice continue to be claims made against lawyers for violations of the Fair Debt Collections Practices Act (FDCPA). Anderson says, “These claims generally concern the manner in which an attorney pursued a collection action against a nonclient debtor. The FDCPA is a strict-liability statute, and liability attaches even without intent or knowledge of a willful violation.”
Anderson adds that many of these claims involve cases without any actual damages. “We have run into several law firms that exclusively represent debtors’ rights, seeking to establish a class action lawsuit against the attorney pursuing the collection. The debtor counsel’s demand is for ‘actual attorney fees,’ even though there may not be any actual damage, which drives these claims toward protracted litigation.”
Anderson advises the following for minimizing this risk: “Don’t dabble in the area of collection work if you are unfamiliar with this area of practice. The fee-shifting component of damages in this area of the law can result in expensive claim mistakes in a hurry.”
The most common claims asserted against real estate lawyers involve failure to engage in adequate discovery and investigation to understand the parties’ intended use of the property being exchanged. Specifically, Anderson says, “Easement issues have presented problems for several insured lawyers this year. These issues include everything from the failure to discover an easement impacting the overall value of the property purchased, to claims of conflict by allegedly favoring a previous client with an interest in the property or real estate development over the lawyer’s current client. The lawyer is blamed for not protecting the client’s investment in the underlying conveyance.”
Here is Anderson’s suggestion for minimizing this risk: “Clear written client communication explaining your role in the transaction is often the difference between cases where a legal malpractice claim is or is not pursued. This is especially important when the client’s objective is not to maximize the value of the real estate, such as a gift or deed to a family member.”
A family breakup can be one of the most emotional times in a client’s life – especially when young children are involved. Family law attorneys know all too well how difficult it can be to manage not only a client’s legal issues but also the emotions of the case.
2018 Percent of Malpractice Claims by Practice Area
22% Bankrupty & Collections
14% Real Estate
10% Family Law
10% Plaintiff’s Personal Injury Work
9% Estate Planning
Family law clients are also often in positions of financial hardship. Anderson says general dissatisfaction with the amount of the attorney fees associated with the handling of the divorce or other family law matter remains a prevalent claims risk. “The client is still miserable after the divorce and facing an outstanding balance owing for the legal services rendered. This can lead to a legal malpractice claim or OLR [Office of Lawyer Regulation] grievance being filed.”
“We have also observed claims where a lawyer is blamed for not properly developing the underlying case so as to ‘maximize’ the client’s interest in the marital property estate, failing to protect a client’s interest in a retirement account, or failing to establish a maintenance claim.”
According to Anderson, in family law, as in real estate matters, good communication is key. “Frequent updated communication with the client regarding the status of their case in the area of family law is paramount. This should include updated billing statements. An inadequate retainer at the outset is often the launching board for a claim or grievance when the lawyer later tries to withdraw or sue the client for legal services owing.”
Plaintiffs’ Personal Injury
As mentioned, this is an area of practice that for years always generated the most malpractice claims. It also used to be the area of practice that generated the highest dollar amount of claim payments.
Anderson says that for the past couple years, both trends have changed. “This year, so far, the sheer number of claims in this area only ranks fourth on our frequency list, and a distant second to bankruptcy and collections claims in terms of dollars paid out.
“One saving grace when it comes to legal malpractice in this area of law is the ‘case within the case’ analysis. Although the statute of limitation may have been missed, the claim against the lawyer is not better than it would have been against the original defendant. A longshot personal injury claim does not automatically become a good legal malpractice case. The claimant must still prove damages in the underlying case, regardless whether there was negligence on the part of the lawyer who handled the case.”
The most common claims asserted against real estate lawyers involve failure to engage in adequate discovery and investigation to understand the parties’ intended use of the property being exchanged.
As for the most common category of mistakes in this area, Anderson says that has not changed – it’s missed deadlines. “The failure to timely prosecute a personal injury claim in advance of the statute of limitation is the most common claim risk facing lawyers doing personal injury work.”
In addition, Anderson says, “We have also observed claims this year where the lawyer is blamed for failing to develop the underlying injury claim with expert support.” And, Anderson says, don’t lose sight of a nonclient in some of these cases. “Claims have been made against lawyers by nonclient lienholders alleging that the attorney failed to satisfy a lien interest out of the proceeds of the client’s personal injury recovery.”
Anderson suggests the following for minimizing the risks of practicing in plaintiffs’ personal injury matters. “Only pursue personal injury cases that you are willing to handle to a conclusion. The weak injury claims that you have no intention of ever filing a lawsuit on are often overlooked and result in missed deadlines.”
Estate, Probate, and Trust Law
Estate planning malpractice claims are most often asserted by “disinherited beneficiaries.” Anderson says, “WILMIC continues to focus our risk management resources in this area of practice, emphasizing the benefits of a clearly defined scope of retention and to make sure that the attorney documents that the client’s estate planning goals were discussed and adequately understood prior to the execution of any documents. Nonetheless, we continue to see claims made by the client’s ‘would-be heirs’ alleging that the lawyer made an error in drafting a will or trust that negatively impacted the client’s intended distribution.”
General dissatisfaction with the amount of the attorney fees associated with the handling of the divorce or other family law matter remains a prevalent claims risk.
To minimize this risk, Anderson suggest the following: “Make sure that your filing and billing records reflect who your client is and is not. Any estate planning instrument that results in an unusual distribution that disinherits a family member could later be scrutinized or challenged. These types of situations need to be handled with precision and care from a documentation standpoint.”
Legal malpractice claims and OLR grievances can often be traced back to a lack of communication and the overall understanding that developed between the lawyer and the client at the outset of the representation.
As Anderson says, “Great client service is often predicated on how well and how often the client received communication and updates from their lawyer. Communicate, don’t dabble, and provide frequent updates to your clients.”
Minimizing the Risks of High-claim Practice Areas
Here are Brian Anderson’s best practices for reducing the hazards of counseling clients with certain types of claims.
Bankruptcy and Collections
Don’t dabble in collections work. The fee-shifting component of damages in this area of the law can result in expensive claim mistakes in a hurry.
Clear written client communication explaining your role in the transaction is vital. This is especially important when the client’s objective is not to maximize the value of the real estate, such as a gift or deed to a family member.
Provide frequent updates to the client regarding the status of their case. Include updated billing statements. An inadequate retainer at the outset is often the launching board for a claim or grievance when the lawyer later tries to withdraw or sue the client for legal services owing.
Plaintiffs’ Personal Injury
Take only the personal injury cases that you are willing to finish. Weak claims for which you have no intention of ever filing a lawsuit are often overlooked and result in missed deadlines.
Make sure filing and billing records clearly identify the client. Any estate planning instrument that results in an unusual distribution that disinherits a family member could later be scrutinized or challenged. Document carefully and precisely.