Legal Malpractice Risk Control in the Covid Era

Episode Notes

Transcript

State Bar of Michigan: On Balance Podcast

Legal Malpractice Risk Control in the Covid Era

08/21/20

 

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Intro:  Welcome to State Bar of Michigan’s On Balance Podcast where we talk about practice management and lawyer wellness for a thriving law practice.  With your hosts, JoAnn Hathaway and Tish Vincent here on Legal Talk Network.  Take it away, ladies.

 

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Tish Vincent:  Hello, and welcome to another edition of the State Bar of Michigan’s On Balance Podcast on Legal Talk Network.  I’m Tish Vincent.

 

JoAnn Hathaway:  And I’m JoAnn Hathaway.  We’re very pleased to have Sean Ginty, Director of Risk Control for CNA Insurance Company join us today as our podcast guest to talk about Legal Malpractice Risk Control in the Covid Era.  So, Sean, would you share some information about yourself with our listeners?

 

Sean Ginty:  Sure, and thanks for having me, Tish and JoAnn, I really appreciate it.  I’m director of Risk Control at CNA.  I’ve been a licensed lawyer in Illinois for the past 25 years.  I started my legal career working for the State Bar Disciplinary Authority in Illinois and after that, I worked for a couple of law firms in Chicago.  I’ve also taught legal ethics and legal writing at a couple of Chicago area law schools.  And just prior to coming to CNA, I worked for the Office of Executive Inspector General for the State of Illinois as their general counsel and chief of staff.

 

Tish Vincent:  Broad experience.  We are so glad that you’re with us today.  Can you share with us what you do basically as the director of Risk Control?

 

Sean Ginty:  Sure.  I run the Risk Control Department for our Lawyers Professional Liability line of business and our department is comprised of four attorneys, including myself.  What we do is, we try to eliminate or at least minimize the exposure from legal malpractice claims that our insured lawyers face.  We do this in a variety of ways.  First, we publish a risk control article every month which highlights a certain risk that we think is worth highlighting to our insureds.  As an example, we recently published articles and topics that include things like avoiding conflicts of interest, which is the leading cause of legal malpractice claims.  We’ve also, in this Covid era, published an article and the risks that you should consider when you and your law firm, attorneys and staff are working remotely.  And also, we recently published an article declining certain representations.

 

In addition to our monthly article, we provide quarterly webinars to our insureds and we have an online risk control course that’s available to our insureds 24 hours a day 7 days a week.  Before the pandemic, and hopefully after the pandemic, we also present live seminars for general audiences and for specific law firms upon request.  We also run a risk control hotline where we provide guidance to our insureds on various Lawyers Professional Liability or ethics questions that they’re facing in their law practices.  And we really try to be proactive with our insureds so that we can nip in the bud any potential problems that they’re having that may lead to a malpractice claim or a bar disciplinary complaint.

 

JoAnn Hathaway:  That’s impressive.  What risks do you see for lawyers and law firms as a result of the COVID-19 pandemic, Sean?

 

Sean Ginty:  Yeah, JoAnn, I mean, that is the big question in our field that everyone is asking themselves and trying to figure out.  I don’t think that we’re going to see new and unique types of claims really bought against lawyers due to the pandemic, but I think we’re going to see some familiar types of problems that get exacerbated by this new world that we’re living in due to the pandemic.  And just a few examples that I can think of — one of the most common errors that we see attorneys making is missing deadlines, might be missing a statute of limitations or missing a discovery deadline.

 

In this new pandemic environment where some courts are closed, some statutes and deadlines have been extended while others are not, it’s really crucial for law firms to stay on top of these deadline issues to know and understand the rules and regulations with respect to any extensions and have a really good countering and docketing system and then also have the ability to convey that information to internal staff, to clients, to witnesses so that the cases and matters that they’re working on can proceed in a timely manner.

 

Another trap that exists for lawyers during these in a really strange times is the inadvertent breach of confidential information, especially when you’re working remotely.  I know for many of us, when the pandemic hit, I went from working in the office almost on a full-time basis to immediately working from home on a full-time basis with hardly any time to prepare for that transition.

 

If you’re running a law firm or part of a law firm, you and your attorneys may be working with unsecured Wi-Fi connections or maybe you’re not encrypting files the way that you should be or you might be more susceptible to clicking on a phishing email that contains malware because you’re not in the office and your guard might be down.  So, it’s really important for law firms to work with their IT and cybersecurity specialist to protect against these types of issues.  And if there is a breach of confidential information, you want to be able to show your clients and the courts that you took reasonable efforts beforehand to guard against those types of breaches.

 

And then, another issue that we’re really warning our attorneys about is the issue of dabbling.  And when I use the term dabbling, I’m talking about attorneys entering into areas of practice in which they have little or no experience.  A lot of attorneys think that the issues of law firm finances and law firm risk exposure are separate and apart from each other, but that’s really not true, and dabbling is a perfect example of how these two issues are often related.  Now, many attorneys find themselves dabbling out of financial necessity.  The area of practice that they worked on, maybe it’s, say, business transactions, maybe that work is drying up due to the economic fallout as a result of the pandemic.  And so, that attorney decides to work in the wills, trusts and estate area to make up for the loss billables and the loss revenue not realizing what a highly complex area of the law, wills, trusts and estate is.

 

And in surveys of legal malpractice claims, failing to know law is often one of the most common errors that leads to legal malpractice claims.  And obviously, if you’re dabbling in an area of practice in which you’re unfamiliar, you’re more likely to make that type of failing to know what the law type of error.

 

So, a while back, we asked our actuaries to take a look at our sole practitioners and we divided them into two groups.  On your insurance application, to become insured, you have to identify what areas of practice you practice in.  So, we told our actuaries, divide them into two groups.  Put one group of the solo practitioners that identified four or more areas of practice that they’re practicing in, that’s group one.  And then in group two, put the sole practitioners that identified three areas of practice or less.  And as you might expect, those in the former category, the sole practitioners that had four or more areas of practice had a much higher number and percentage of claims against them than those sole practitioners that only had three areas of practice or less.  So, I think that’s a pretty powerful example of how dabbling really constitutes a real risk for lawyers.

 

Tish Vincent:  That’s very interesting, very interesting.  I’m wondering, are there certain areas of practice, other than having too many, that would be most impacted by the Covid-19 pandemic?

 

Sean Ginty:  Yeah.  These are just really kind of educated guesses that I’m kind of making and sort of anecdotal information that I’ve received.  But I think there’s a few areas of practice that really jump out to me that I think lawyers are going to see an increase in their workload and obviously, anytime there is an increase in the workload, there’s an increased risk of a legal malpractice claim, because if you don’t have these systems and procedures in place to handle that overflowed work, you may be asking for trouble.

 

One of the big areas obviously is wills, trusts and estate with so many people getting seriously ill and dying.  There are wills being probated as we speak as a result of this pandemic.  There are other people realizing that they were living in some pretty serious strange times.  It might be time to get my affairs in order and get a will or a trust plan executed.  And we’re hearing from certain law firms that concentrate in that area that they are seeing an increase in work.

 

Certainly, labor and employment lawyers are awfully busy these days.  You’ve had a lot of businesses that went, as I said earlier from working in the office to working remotely, that raises a lot of legal issues and then you have some employers trying to bring their employees back into their offices, back into businesses.  Some employees may have pre-existing health conditions that put them at greater risk for problems with the pandemic, and that creates legal issues for labor and employment lawyers as well.  So, I think you’re going to see an increase in that area of practice as well.

 

And then, bankruptcy is another big issue.  Unfortunately, due to the economic fallout related to the pandemic, many businesses had closed, other businesses are going to have to restructure to handle the debt that they have, and that’s going to require some bankruptcy lawyers getting involved in that.  And we’ve got some law firms that specialize in representing creditors while others may focus on representing the debtors.  Some law firms do both, but I think no matter which side you’re on, there’s going to be an increase in work there as well.

 

In terms of which areas of practice may suffer due to the pandemic, I’m a little hesitant to hazard a guess, I think, we’re still waiting to see how that shakes out.  I’m sure you both have seen stories in the press about certain law firms that have cut the salaries of attorneys and legal support staff.  Others have laid off attorneys and legal support staff, but I don’t think those decisions are necessarily tied to a specific area of practice or a group of areas of practice.  I think in those cases, what you had was firms that may have been struggling before the pandemic with having enough operating capital to run the law firm.  And then when the pandemic hit, revenues dried up a bit because clients were having trouble paying their legal bills, forcing those law firms to take the actions they did.  But I think all law firms are being impacted by this pandemic and the risks may vary for them, they need to be aware of them and make sure they have processes and procedures in place to deal with the fallout from this pandemic.

 

JoAnn Hathaway:  So, Sean, do you expect to see an increase in claims?

 

Sean Ginty:  We do, JoAnn, because history tells us to expect one.  Any time there’s an economic downturn, claims against lawyers have increased.  You’ve got a lot of people out there that become financially desperate and they want to bring claims against perceived deep pockets like lawyers.  And as I said, the history really illustrates this as well.  We had our last recession around 2008 to 2009, and that resulted in a lot of claims for us in 2010, 2011, 2012 against lawyers and law firms and all sorts of practices.

 

I recall that real estate lawyers really received a lot of legal malpractice claims during those years because they had a lot of clients who ended up having homes that were underwater, meaning that the amount of money they owed on their mortgages was a far greater amount than their homes were actually worth.  So, maybe in a good economy, when home value is steadily increasing, clients aren’t really looking to sue their lawyers because everybody’s happy.  But when they realized that they owe more on their house than the house is actually worth, some of them are motivated to find a plaintiff’s lawyer and go through those closing documents and go through that deal with a fine-tooth comb and find any mistake that the real estate lawyer may have made and then turn around and sue that real estate lawyer.  So, I think the lesson is that clients are generally in a less forgiving mood during hard economic times.

 

JoAnn Hathaway:  So, speaking of real estate, do you anticipate that that’s another area now with the landlord tenant issues that may become a hotbed too?

 

Sean Ginty:  Yeah, absolutely, that is going to, I think, see a big increase in work as well.  You’ve got — I’m sure you’ve read this too, a lot of the law firms are contesting their leases for their office buildings saying, “Hey, we can’t really use these spaces due to the pandemic.”  So, they’re suing their landlords trying to get out of their leases, so that’s another area where I think there’s an increase in work.

 

And then, usually in hard economic times, there might be a slowdown in real estate because people aren’t buying homes as much.  But I live in a fairly large urban area and a lot of real estate lawyers are busy because a lot of people are looking to buy homes and have more space due to the fact that a lot of people are working from home.  They may have a spouse and kids and people just need more room to sort of be able to both live there and work there.  So, real estate work is one of those areas where I think there’s going to be an increase in work, so you need to be aware of that if you practice there and make sure that you’re not taking on more work than you can handle.

 

Tish Vincent:  What kinds of things can law firms do to better protect themselves from a claim being filed against them?

 

Sean Ginty:  A lot of the guidance that we offer here is the same kind of guidance that we would offer even in non-pandemic times, but I think they become even more important due to the fact that, as we just discussed, we think there is going to be an increase in claims.  One of the most fundamental things you can do is really use engagement letters on a regular basis.  They really serve as one of the best risk control measures that you can take.  And having a tightly worded scope of representation section that indicates clearly what you intend to do and, in some cases, limiting your scope of representation saying explicitly what you’re not going to do can be a lawyer’s best friend if that legal malpractice claim is filed a couple years down the road.

 

We at CNA believe so strongly in engagement letters.  We have an engagement letter project that is designed around encouraging our insureds to use engagement letters on a regular basis.  When I first got to CNA about nine years ago, we were getting some conflicting information from our insureds.  On the underwriting insurance application, to get the insurance, we ask them a single question about engagement letters.  We said, “Do you use engagement letters on a regular basis?”  And 97% of the insureds that ended up signing with us checked the box yes, they did.  But when we got the claim, and our claims department would ask for the engagement letter in the underlying case that led to the legal malpractice claim, we’d often get a shrug of the shoulders from our insureds saying, “Oh, you know, that’s the one case where we didn’t really get that engagement letter executed,” or, “We forgot to do it that one time.”

 

So, one of the things that I was first tasked with when I got to CNA was sort of working with our underwriting — our claims and our actuary departments to get some hard numbers around engagement letter usage by our insureds.  And we instituted a rule that every time a claim came in, our claims reps were to ask for an engagement letter and they were supposed to mark whether one was delivered by the client, one wasn’t.  And if 90 days passed after the reporting of the claim and we got no engagement letter, then we assume there was no engagement letter and we compiled this information for a number of years.  We found that the percentage of our insurers that are actually using engagement letters is much less than 97%.  Do either of you have a guess as to what that percentage was?

 

Tish Vincent:  I wouldn’t venture a guess, I’m afraid.

 

JoAnn Hathaway:  No, we’re going to rely on you.

 

Sean Ginty:  Sadly, it was about 15%.  That number has slowly increased over the years because we really incentivize our insureds to use engagement letters.  In fact, we have a deductible reduction where they can get 50% off their deductible if they get a claim, if they can produce an engagement letter in the underlying matter that led to the claim even if that engagement letter doesn’t really provide germane to the defense.  So, we have seen a slight uptick in the usage of engagement letters, but we really think that that is one of the strongest risk control tools that lawyers can use.

 

And then, along those same lines, just documenting the client file during the course of the representation is also a very strong risk control measure, especially at those junctures in the representation where key decisions are being made.  Maybe you are not pursuing a certain count against a defendant because you think it’s not really as meritorious as the other allegations that you’ve got listed.  But you want to make sure you have your clients buy into that and that you document that in a letter to the client or at least to the file indicating the thought process and how that decision was made.  Same thing if you’re maybe not going to call a certain witness.

 

Again, those key decisions need to be documented because oftentimes at the time it happens, the lawyer and the client will be in agreement, but if the case or the matter goes bad, it might be two or three years down the road and then the client has a completely different recollection than the lawyer of how that decision was made.  And judges and juries expect lawyers to have things in writing and if it devolves to a he-said, she-said-type argument at a legal malpractice trial, oftentimes, attorneys end up losing those types of battles.

 

For the pandemic that we’re facing, I think client communications are more important than ever.  When I was bar disciplinary counsel, the most common complaint we got from clients against attorneys was that they were neglecting their cases and not communicating with them.  In the heightened state of anxiety that we’re in due to this pandemic, client communication is more important than ever.  And if you have closed your law office, I mean, you definitely want to reiterate with clients that even though the physical office may be closed, you’re still available via email or phone or however you communicate with the clients and you want to reasonably respond to their request for information as well.

 

We talked a little bit before about breaches of confidentiality with so much of the workforce in the legal profession working from home, it’s really important for their firm to follow their IT security guidelines and policies, make sure that the lawyers and support staff are aware of that and working from secured Wi-Fi networks and not falling for those phishing email scams.  And if you’re a law firm that doesn’t have standalone cyber insurance coverage, you may want to consider getting that in these times.  Keeping abreast of the changing rules and regulations, knowing the law, knowing the deadlines, very, very important along with good countering and docketing systems.

 

JoAnn Hathaway:  Sean, you had mentioned the client communication being so big and a thought came to mind on with regard to that, both verbal and written communication, and I would think, again, with so many clients being so stressed out as many people are, but also having financial difficulty, if a lawyer does engage in something on a matter and has not appropriately communicated that to the client and then the client gets that monthly bill, and if they’re being billed hourly, and suddenly they’re seeing that they’re billed for something, I can see how that would result in a very disgruntled client.

 

Sean Ginty:  Yes, absolutely.  You don’t want your client billing records to be the first notice the client gets of a change in direction that you’re taking with the case or the matter, that’s a very good point.  Now, at least it’s in writing.  I mean, we’ve talked about the importance of documentation, but I think it just emphasizes the point too that you want to have that communication before with the client so that you get the clients buy in.  And if there’s going to be a disagreement, you want to hash that up before you start doing the work because in reality, you may have to eat those billable hours if the client strongly disagrees and doesn’t want to go forward with the different line of thought you had in handling the case.

 

Tish Vincent:  Yes.

 

JoAnn Hathaway:  So, how do lawyers find resources to help them meet their ethical and fiduciary duties?

 

Sean Ginty:  Many law firms, especially the solo and smaller ones, and the mid-size and larger ones too, are more and more relying on third-party vendors to help them with calendaring and docketing systems, cyber security, cloud computing, things in that nature.  Good first step is to ask similarly situated law firms in your area about who they use and what their experience with those vendors is like.  You could also contact your carrier, your insurance carrier, and see what they have to say.

 

We have an allied vendor program where we have relationships with about a dozen various third-party vendors in all sorts of different areas.  And if the CNA insured gives their policy information, the policy number, to these vendors, they get a discount for their services, so it’s something that lawyers are outsourcing more and more of that IT cyber security work and it’s really important to have good vendors that you can rely to do that.  Obviously, you have to do your due diligence and make sure you’re picking the right vendor that can handle the job, but they can really be a great resource when used responsibly.

 

Tish Vincent:  And what do legal professional liabilities that insurers think about the growing issue of lawyer well-being?

 

Sean Ginty:  That’s a very important issue that’s gotten a lot more transparency in the last four or five years or so.  There was a groundbreaking study done by the ABA and the Hazelden Betty Ford Clinic a few years ago that surveyed thousands of lawyers from across the country and really bought to light these issues in the legal profession.  Some of the findings were really astounding.  More than a quarter of the surveyed lawyers suffer from depression, almost 20% suffer from anxiety, which is probably heightened now during these pandemic times.  Nearly 25% are impaired by stress and a lot of people who are struggling with mental health issues also have substance use disorders as well.

 

And as lawyers use alcohol and drugs in much higher percentages than the general population, obviously from an LPL insurer perspective, it seems fair to say that lawyers who suffer from serious mental health or substance use disorders are at a greater risk of a claim than those lawyers that don’t have such issues.  And you know, the Rules of Professional Conduct talk about competently representing your clients and diligently representing your clients.  We talked about failing to know the law is often a leading error that leads to illegal malpractice claims.

 

So, there are a handful of states out there that have addressed the issues of lawyer well-being with competence.  For example, Virginia’s Rule 1.1, which is the competency rule, has language in the commentary section that says that a lawyer’s mental, emotional and physical well-being impacts a lawyer’s ability to represent clients and to make responsible choices in the practice of law and maintaining the mental, emotional and physical ability necessary for the representation of a client is an important aspect of maintaining competence to practice law.  And I think you’ll see more and more states kind of highlighting the importance of lawyer well-being in their Rules of Professional Conduct.

 

We have certainly published a couple of articles on lawyer well-being emphasizing the resources that are out there.  A lot of mid-sized and larger firms may have specific policy geared towards lawyer well-being, which is great.  For the solos and the smaller firms, I think really being familiar with your jurisdiction’s lap and lawyer’s assistance programs can go a long way towards providing some resources to help lawyers.  Yeah, we definitely want to play a role in bringing this issue to light and helping attorneys deal with these issues so they can, not only get better, but effectively represent their clients as well.

 

Tish Vincent:  Absolutely.

 

JoAnn Hathaway:  Sean, what should a lawyer do if he or she believes that they have made an error that may lead to a claim?

 

Sean Ginty:  Yeah, that’s a question that we get a lot on our hotline.  It’s really important to acknowledge that all of us make mistakes and certainly, if you’ve practiced long enough, you’re going to have them in your practice as well.  The best thing you want to do is confront the error upfront and not let it fester.  And when you’re dealing with these error issues, the key question that you have to ask yourself is, is the error that I made a material or substantial error that needs to be communicated to the client?  And that of course begs the question, well, what’s a material or substantial error.

 

Fortunately, the ABA issued an opinion on this recently, it’s Formal Opinion 481.  And in that opinion, they defined material error as one that a disinterested lawyer would consider reasonably likely to harm or prejudice the client or cause a client to consider terminating their representation even in the absence of harm or prejudice.  So, as a lawyer, if you’ve made an error and you’re weighing whether this is a serious enough error where you’ve got to tell the client, you need to determine, is there a corrective measure that can be taken quickly that will solve this, how likely is it that that action is going to result or be allowed to fix it, what are the odds that those measures will fail.  And if you think that there might be action you can take but there’s no certainty that it’s going to work to correct the error, and if it doesn’t, it may even further prejudice the client, I think that’s the type of error that you’ve got to explain to the client.

 

Now, before you have that discussion with the client, you can certainly seek counsel on it for mid-sized and larger firms that might be a discussion with your firm general counsel.  For the solo or smaller firm, it might be consulting with outside counsel that concentrates in the area of ethics and legal malpractice.  You could also put your carrier on notice of a potential legal malpractice claim and discuss what they think you should do about it.  They might, in some cases, offer pre-claims assistance to help you overcome the error.

 

But again, if after those consultations, you still feel it’s a material serious error that’s got to be reported, you need to disclose that to the client.  We suggest that you have that discussion in-person that you don’t admit liability.  You don’t say that you neglected the case, that that neglect is approximately caused to the damages caused the client.  You just stick to the facts.  You say you made an error, maybe you’ve missed a deadline, maybe you failed to call a witness that needed to be called.

 

In addition to admitting the error, you also have a duty to inform the client that they may have a cause of action against you.  Now, you don’t want to go into the merits of that cause of action, you don’t want to have a lengthy discussion about it, but you do want to put them on notice that they may want to pursue that as well and then you want to follow up that hopefully in-person discussion up with a writing.  It’s important to document that you had the discussion, what was said during the discussion, and oftentimes those letters can start the clock running on the statute of limitations for any potential legal malpractice claim.

 

JoAnn Hathaway:  Well, it looks like we’ve come to the end of our show.  We’d like to thank our guest today, Sean Ginty, for a wonderful program.

 

Tish Vincent:  Yes, excellent program.  I think everybody should listen to this.  Sean, if our guests would like to follow up with you, how could they reach you?

 

Sean Ginty:  Yeah, they can contact me at my email address.  I go by the middle name Sean, so it’s a little confusing.  My email address at CNA is [email protected] or you can give me a call at (312) 822-3309.

 

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Tish Vincent:  Thank you, Sean.  This has just been an excellent discussion.

 

Sean Ginty:  Well, thank you, Tish and JoAnn.  I really enjoyed it and thanks again.

 

Tish Vincent:  This has been another edition of the State Bar of Michigan on Balance Podcast.

 

JoAnn Hathway:  I’m JoAnn Hathaway.

 

Tish Vincent:  And I’m Tish Vincent.  Until next time.  Thank you for listening.

 

Outro:  Thank you for listening to the State Bar of Michigan on Balance Podcast.  Brought to you by the State Bar of Michigan and produced by the broadcast professionals at Legal Talk Network.  If you’d like more information about today’s show, please visit legaltalknetwork.com, subscribe via Apple Podcasts and RSS.  Find the State Bar of Michigan and Legal Talk Network on Twitter, Facebook and LinkedIn, or download Legal Talk Network’s free app in Google Play and iTunes.  The views expressed by the participants of this program are their own and do not represent the views of, nor are they endorsed by Legal Talk Network or the State Bar of Michigan or their respective officers, directors, employees, agents, representatives, shareholders and subsidiaries.  None of the content should be considered legal advice.  As always, consult a lawyer.

 

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