I saw an interesting case the other day out of Ohio that gives some hope to the many lawyers who have been victims of "phishing" scams wherein they deposited counterfeit checks into their clients' funds accounts, wire money to scammers and then belatedly learn that they have depleted their IOLTA accounts when the phony checks bounce.

This has been going on for some time, and will continue as long as there is a limitless pool of crooks with access to the Internet and a concomitantly limitless pool of credulous lawyers. While it all began with the Nigerian Prince scam ("I have inherited a gazillion dollars and you can have half if you would just send me some money for postage") and now involves phony invoices sent for collection where the debtor immediately tenders payment, phony family decrees (same thing) and phony retainers where the work is cancelled and the client asks for their money back less 20 percent for doing nothing. (When was the last time a real client told you to keep a part of an unearned fee?)

Unlucky lawyers have not had much success in getting banks to pay in these circumstances. Even though the banks deposit the counterfeit checks and credit the lawyers' accounts (for a time), it turns out that the depositor and not the bank is responsible for assessing the bona fides of checks. Some have also tried to get their malpractice carriers to cover the loss, with mixed results. But the Ohio case, Stark & Knoll v. ProAssurance Casualty Co., shows that it can happen.

In Stark & Knoll, a lawyer in a firm fell for the typical collection scam and took in a counterfeit check. By the time it was discovered, they had wired $170,000 to Japan. The carrier did what many carriers do when faced with claims that are a bit out of the ordinary—it filed for declaratory judgment in federal court seeking a ruling that there was no coverage.

The first defense was that the work for the phony client was not legal work because the money had come in so quickly that the firm had to do little beyond send a retainer letter and do a conflicts check. The carrier called this ministerial or administrative and not legal work. The judge found differently.

The carrier than claimed that the misappropriation of client funds was not by the firm but by third parties — i.e., the crooks — and that the policy did not cover them. Nah, the guys who made the errors were the lawyers, not the crooks. Crooks don't have "clients," so they cannot misappropriate "client" money.

Finally, the carrier's last fall-back position was that there was a $25,000 "per client" deductible, and since 51 clients had their money pooled in the clients' funds account the deductible should be 51 times $25,000 or $1.275 million. Luckily for the firm (and not so luckily for the carrier), the declaration page also had an aggregate deductible of $0. Oooopppsss! This created an ambiguity, and ambiguities are construed against the carrier/drafter and, thus, there was no deductible. That's an error that probably will not be made again.

I don't know whether this case will stand up on appeal. It gives me no hope when the judge calls her own decision a "close call." But when I shared this case with some folks who are doing a CLE with me on cyber-risk for law firms, an insurance agent called to say that he had been successful in getting one of his clients covered for a similar loss.

So what is the take-away from this? Well, as I have said before, there is no free lunch. If the legal work is going to generate you a great fee for doing nothing, maybe your common sense is being blinded by the lure of quick cash.

I actually responded to one of these Nigerian letters one day because I was writing a column and wanted to see what happened if I did. I now get two or three of these e-mails a day. One of my colleagues brought in an invoice he had gotten from a scammer. It looked quite legitimate until we realized that the local Wal-Mart had probably not ordered 9,000 compressors and if they had, the compressor company probably would be hiring someone in Arkansas to sue them.

But if you (or your associate) falls for one of these scams, there may be hope. As my friends who teach uninsured motorist seminars always saw, "READ THE POLICY." Sometimes you get lucky.•