Ouch!!

By Jeffrey B. Albert

 

            The already tight lawyers’ professional liability insurance market just got a little tighter. With the recent insolvency of a leading Virginia reinsurer of professional liability claims, nearly 11,000 lawyers lost coverage. Although those lawyers likely shared no common professional liability insurer with Pennsylvania lawyers, this flood of lawyers pouring into the legal malpractice market at a time when the willingness to issue professional liability insurance coverage for lawyers was already the tightest in years will only make things worse here.

            As many of us have commented in the debate over medical malpractice claims and availability of medical professional liability insurance, tight markets come and go. When markets soften, both insurers and their insureds have short memories. When markets are soft, poor claims histories and high exposure activities mean little. When the professional liability insurance market is tight, relatively good claims histories may not help in attracting the interest of even one insurer.

            No lawyer and no law firm can avoid being subject to a claim at some time, and in a tight market even the existence of one claim may be disqualifying in securing renewal of existing coverage and access to new coverage. Now, it almost seems like this pain is inevitable.

            There are some ways of responding to a tight market, but each of them may have some pain. First, a lawyer can limit areas of practice to those in which the lawyer has the best support and expertise. Insurers do not like to insure lawyers who consider themselves to be “jacks of all trades but masters of none.” One of the biggest reasons for the higher incidence of claims among solo and small office practitioners is the failure to focus and control the area of practice.

            Second, a lawyer can share the risk by associating with more experienced lawyers, especially in matters requiring a high degree of skill and support. Insurers are impressed by lawyers who understand their own law offices’ limitations.

            Third, a lawyer can actually associate with a law firm that has a good claims history and long-term relationship with an insurer. Sure, this may involve deferring the goal of being one’s own boss, at least temporarily. However, when an insurer evaluates a risk, the broader the pool of attorneys involved, the more likely it will be to underwrite the risk.

            Fourth, a lawyer should review the ways in which the “law business” is conducted. Often the clients who generate the smallest fees produce the greatest problems, including professional liability claims. In other instances, lawyers hungry for business take on “attorney-hoppers” — clients who find a reason to fire (and sue) every lawyer they have ever met. Other clients are simply disruptive, making it hard for the lawyer to concentrate on providing quality service and certainly to bill the client for all of the service required. Lawyers should focus on screening out those clients who are likely to cause headaches or a lapse of attention within the office.

            Finally, to prevent claims from arising, a lawyer should consult with other lawyers concerning matters of ethics and professional responsibility. Frequently, issues that later divide lawyer and client, giving rise to claims, stir from disputes with clients that can be resolved at an early stage. Seeking advice may cost fee dollars and result in a loss of some fees, but this precaution should reduce the possibility of a claim.

 

Jeffrey B. Albert is a shareholder of the Philadelphia-based law firm of McKissock & Hoffman P.C., with offices also in Harrisburg, Doylestown, West Chester and Westmont, N.J. He serves as co-chair of the PBA Task Force on Law Practice Management and Legal Technology and as chair of a PBA Professional Liability Committee subcommittee.