Ethics column in the March 2022
Wisconsin Lawyer, attorney Dean Dietrich posed the following question from a lawyer:
“Question: I have been contacted by a former client who claims that I committed malpractice when representing her. She is asking to meet with me to discuss the settlement of her claim. Should I do that?”
Dietrich then discussed the implications of SCR 20:1.8 on the lawyer’s decision about how to address the issues raised by the client’s question and, ultimately, settle the matter. In addition to these ethical concerns, there may be other legal and practical matters to consider before entering into discussions to resolve a client’s malpractice claim.
A Claim! (Gulp) Now What?
Most lawyers’ professional liability policies, including those provided by Wisconsin Lawyers Mutual Insurance Co. (WILMIC), are claims-made-and-reported policies, not occurrence policies. Most people are more familiar with occurrence policies; that is, if an insurance policy is in effect when the incident – for example, the car accident or the fire – happened, there is coverage for the claim.
Claims-made-and-reported policies operate very differently. To have coverage under a claims-made-and-reported policy, there needs to be a policy in effect at the time a reasonably prudent lawyer knew or should have known about an error or omission. In addition, notice in writing must be given to the carrier. Both events – occurrence of the claim or potential claim
and the submission of the report (the written notice) – must happen
during the policy period for there to be insurance coverage.
What Must Be Reported
Claims-made-and-reported policies require policyholders to report claims, potential claims, and grievances. Each carrier may define each term slightly differently, but they are generally defined as follows:
Claim means a lawyer’s receipt of a demand for money or services alleging a wrongful act. A
wrongful act is any act, error, or omission that is negligent in the rendering of or failure to render professional services to a client.
Potential claim means a lawyer’s awareness of facts or circumstances regarding an act, error, or omission that a reasonably prudent lawyer would expect to be or to become a basis for a claim, regardless of whether the lawyer believes such a claim will be made.
Grievance is defined in SCR 22.001(5) – “… an allegation of possible attorney misconduct or medical incapacity received by the office of lawyer regulation.”
The existence of a claim (such as in the ethics question quoted above, which includes an allegation of a mistake and a demand for payment) is usually obvious. In many instances, a client alleges that the lawyer made a mistake and demands restitution. The recompense sought by a client could range from a return of fees the client already paid to a demand for payment for financial losses allegedly suffered.
Other matters may be subtler, and the lawyer might be either reluctant or unsure whether to report them. For example, in reviewing a file, a lawyer might discover a problem of which no one else is aware. Although the lawyer might want to look the other way, the lawyer has a duty under the terms of the lawyer’s insurance policy to inform the insurance carrier immediately (plus, ethical duties under SCR 20:1.4 likely require the lawyer to inform the client). The reporting obligation to the insurance carrier is contractual, so each policy needs to be read for specific obligations.
Horse Hockey! Buffalo Bagels! Pony Pucks! Grade-A, 100% Bull Cookies!
Fans of the old TV show
M*A*S*H will recognize a few of the many “Potterisms” from Sherman T. Potter, the commanding officer in that sitcom. He uttered these expressions when he confronted complete nonsense. A lawyer facing a claim may conclude that the client’s allegations or grievance are “grade-A, 100% bull cookies,” but the reporting requirement in a professional liability policy includes allegations of mistakes that the insured believes are frivolous or unfounded. As a condition of coverage, lawyers have the duty to report any circumstance that could give rise to a claim, regardless of whether they believe the matter is defensible. If the matter is without merit, reporting it to the insurance carrier fulfills the lawyer’s duty and triggers protection if the matter mushrooms into a problem.
It is important not to complicate a legal malpractice error by inadvertently entering into a prohibited transaction with a former and unrepresented client while trying to rectify a mistake.
The Importance of Timely Reporting
Every year, WILMIC’s claims attorneys learn about hundreds of reported matters from policyholders. Chances are, they have encountered similar situations already, which puts them in the position of being able to help repair any mistakes. Sometimes the original lawyer can undertake the repair work on behalf of the client, but only if there is no conflict of interest in doing so and if the client consents after being fully informed of their right to seek separate counsel regarding the repair and a possible claim arising out of the mistake that makes the repair necessary. (See SCR 20:1.7.) Other times, the in-house claims attorneys can handle the repair themselves. WILMIC has spent decades establishing a network of defense lawyers with the experience and talent to help when outside assistance is needed.
Although our policyholders might be dreading the call with their stomach in knots, they often tell us how relieved they feel after talking to us. Policyholders quickly learn whether they had not made a mistake or their error can be cured. And when a repair is unavailable, we deal with the claim and can advocate on their behalf with or without the assistance of outside counsel. If a settlement is required, we can also assist with navigating the ethical concerns identified by Dietrich to avoid the pitfalls of violating SCR 20:1.8.
Failure to Report a Matter
The consequences for failing to report in a timely manner can be serious. The lawyer may lose coverage for not reporting a claim or potential claim on the reissue application or for failing to report a matter in a timely manner during the policy period. Lawyers who delay reporting mistakes might also jeopardize the opportunity to repair the problem.
Use your malpractice carrier when necessary; that’s what you’re paying for. As Dietrich wrote in his article, it is important not to complicate a legal malpractice error by inadvertently entering into a prohibited transaction with a former and unrepresented client while trying to rectify a mistake. Reporting the matter in a timely fashion to the insurance carrier will allow the carrier to help see the lawyer through it. In fact, there may be a resolution that can avoid a claim. So, give your carrier a call – that’s why they are there.
Meet Our Contributors
What is your best advice for new lawyers?
When I was a young associate, one of my mentors told me, “A good lawyer knows what he knows; a great lawyer knows what he doesn’t know.” A lawyer has a responsibility to be competent. To be competent, you can study or you can find someone to teach you. Understand yourself and how you best learn, and either make use of vast information at your fingertips or network and find someone willing to teach you.
Matthew M. Beier,
Wisconsin Lawyers Mutual Insurance Co., Madison.
Become a contributor! Are you working on an interesting case? Have a practice tip to share? There are several ways to contribute to
Wisconsin Lawyer. To discuss a topic idea, contact Managing Editor Karlé Lester at (800) 444-9404, ext. 6127, or email
firstname.lastname@example.org. Check out our
writing and submission guidelines.
» Cite this article:
95 Wis. Law. 55-56 (May 2022).