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Vol. 73, No. 5, May 2000 |
Managing Risk
Limit Your Areas of Practice
to Serve Clients
The Jack-of-All-Trades lawyer runs a greater risk of committing
legal malpractice.
by Anne E. Thar
Legal malpractice claims statistics show that general practitioners
receive a disproportionately higher number of claims than lawyers
who concentrate their practices in a few areas of the law. Furthermore,
one out of every 10 legal malpractice claims is caused by a lawyer's
failure to know or properly apply the law.
Failure to Know the Law
The statistics above reinforce the notion that attorneys who
attempt to be all things to all clients are at a greater risk
for legal malpractice. The following claims demonstrate this
point.
Claim No. 1. Lawyer Brown has been in practice 10 years.
While she concentrates in personal injury and employment law
litigation, Brown feels compelled for economic reasons to take
the occasional divorce case that comes her way. Besides, Brown
reasons, "Anyone can do a simple divorce."
Thar to speak on avoiding legal malpractice
Anne E. Thar will speak about lawyer specialization as a way
to reduce legal malpractice risk at a State Bar of Wisconsin
CLE Seminar, "The Savvy Practitioner: Finding Your Niche,
Documenting Your Work, and Avoiding Malpractice," Thursday,
July 13, at the Country Inn, Waukesha. A video of the seminar
will be broadcast Tuesday, Sept. 12, at State Bar video locations
statewide. The program has been approved for up to 3.0 continuing
legal education and ethics and professional responsibility credits.
For registration information, call the State Bar at (800)
728-7788 or register online. |
Lawyer Brown agrees to represent Client in her divorce. As
part of the settlement, Client will obtain title to the family
home, which the couple has owned for 30 years. Client informs
Brown that after the divorce, she intends to sell the home, move
to Arizona, and start a new life. As soon as the divorce is final,
Client sells the home and discovers that she is personally responsible
for a whopping capital gains tax generated by the sale. Client
sues Brown, who never considered the tax consequences of the
sale in negotiating the terms of the divorce.
Claim No. 2. Lawyer Smith has maintained a general
solo practice for 30 years. Smith prides himself on being a "full-service
firm." In other words, Smith feels competent to handle any
type of legal matter that may arise. After all, he has followed
this philosophy for 30 years and never been sued for legal malpractice
- until now.
Lawyer Smith agrees to represent Client in the sale of his
asphalt business, Asphalt Co. Client forgets to mention to Smith
that several years earlier, Client executed an indemnity agreement
with Bond Company pursuant to which Client is personally liable
for any defaults by Asphalt Co. In exchange for the indemnity,
Bond Company regularly issues performance bonds for the projects
undertaken by Asphalt Co. Because Lawyer Smith has never represented
a construction-related company, he doesn't think to ask
Client about indemnity agreements. As a result, nothing in the
buy-sell agreement addresses this point. Client, on the other
hand, assumes that the sale will extinguish all of his liability
with respect to Asphalt Co.
After the closing, Bond Company continues to issue bonds for
new projects undertaken by Asphalt Co. Bond Company is not advised
of the change in ownership. New Owner defaults on one of the
contracts and Bond Company is obligated to pay $75,000. Bond
Company then pursues Client under the terms of the indemnity
agreement. Client in turn sues Lawyer Smith for failing to terminate
Client's liability to the Bond Company as part of the terms
of the sale.
Claim No. 3. Lawyer Jones practices primarily in worker's
compensation and plaintiff's tort litigation. Jones is hired
by Client to represent him regarding injuries he sustained while
operating a punch press at work. In addition to filing a worker's
compensation claim, Lawyer Jones also files a products liability
action against the manufacturer of the punch press.
The manufacturer subsequently files for bankruptcy. Rather
than engage co-counsel to assist her in the bankruptcy aspects
of the case, Jones continues to handle the matter on her own.
As a result, Jones fails to make a timely claim in the bankruptcy
case on Client's behalf. Client hires a new lawyer and sues
Jones for legal malpractice.
Claim No. 4. Lawyer White's suburban practice
is driven primarily by the needs of his clients because he finds
it impossible to say no. White has never felt comfortable with
tax issues and therefore has shied away from wills and estates.
Lawyer White is approached by a couple whom he represented a
few years previously in a small personal injury matter. Clients
ask Lawyer White to prepare their wills. White initially tries
to decline the engagement but eventually capitulates when the
couple insists they simply wouldn't trust any other lawyer
in town.
Before agreeing to represent Clients, White asks Clients whether
their taxable estate is worth more than $650,000. "Oh no,"
state the couple. "Our home is only worth about $200,000."
Clients erroneously believe that their life insurance policies
and IRA accounts are exempt from estate taxes and therefore don't
mention these assets to White. Based upon their verbal response,
Lawyer White never bothers to have Clients fill out a form detailing
their assets. White has Clients execute simple wills. After the
death of one of the Clients, Lawyer White is sued when it becomes
apparent that trust documents could have reduced the estate taxes.
Guidelines to Prevent Malpractice
To avoid legal malpractice claims stemming from a lack of
knowledge or familiarity in a particular field, consider the
following guidelines.
- Recognize you cannot be all things to all people. The law
is too complex and changes too quickly today to assume you can
do it all - even after many years in practice. In short,
there need to be some boundaries to the type of legal work you
will accept. Make a list of the areas of the law you feel competent
to perform and stick to those areas.
- Don't deviate from your areas of competency as favors
to friends, relatives, or long-time clients. In the long run,
you serve neither your client nor yourself when you take a matter
beyond your knowledge. And don't think that your neighbor,
brother-in-law, or most tenured client won't sue you. They
will, and your malpractice carrier has the claims to prove it.
- Watch out for the curve ball. Even "specialists"
must recognize when a particular matter is leading them down
an unfamiliar path. At that point, ask an expert for assistance.
- When in doubt, talk the matter over with a colleague who
is more proficient in the area in question. To accomplish this,
you will need to develop a network with other lawyers. Active
participation in a bar organization is an excellent way to network
and find out who concentrates in the areas in which you may need
advice. (Please see the accompanying sidebar on the State Bar's
Lawyer-to-Lawyer Directory.)
- Give a little, get a lot. The best way to develop those networks
is to be generous with your own time. Lawyers are more than willing
to assist a colleague if they know that the courtesy will be
returned. It just might help us all feel a little better about
the practice of law as well.
Anne E. Thar, Northwestern 1983, is vice president
and general counsel of the Illinois State Bar Association Mutual
Insurance Company. |
- If you want to develop an expertise in a new area of the
law, try co-counseling with a more experienced lawyer until you
feel secure enough to handle such matters on your own. If you
do co-counsel, make sure the client approves of the relationship
and the fee-sharing arrangement in writing. Continuing legal
education seminars also can be valuable, but are no substitute
for working with an expert. Finally, research which periodicals
and resources the practitioners in that field find most valuable
and then subscribe to them.
- Stay out of foreign jurisdictions. Keeping current with the
law in your own jurisdiction is difficult enough.
- Develop detailed checklists. Every lawyer should have some
type of checklist for the legal matters he or she undertakes,
whether it's a divorce, a residential real estate closing,
a personal injury claim, or the sale of a small business. Checklists
not only enumerate the tasks to be accomplished but also can
highlight the legal issues that must be considered in handling
the matter.
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