Randy Evans and Shari Klevens, Dentons partners. ()
Most attorneys instinctually try to fix a mistake. If the problem can’t be fixed, the temptation is to either ignore it in hopes that it just goes away, or worse yet, fall on the sword for something that may not even constitute a recoverable claim for malpractice.
Sooner or later, every lawyer makes a mistake. It may be a drafting error in a contract, an improperly calendared court deadline, or an argument not properly preserved for appeal. Sometimes, the errors can be fixed with a phone call or amended agreement, and the client doesn’t suffer any resulting damages. Sometimes, however, the errors are more daunting. What then?
How an attorney responds in those critical moments upon discovering her or his own mistake (or that of a colleague) may determine whether a mistake can be rectified or whether it will grow into a claim for legal malpractice.
Most attorneys instinctually try to fix a mistake. If the problem can’t be fixed, the temptation is to either ignore it in hopes that it just goes away, or worse yet, fall on the sword for something that may not even constitute a recoverable claim for malpractice. More often than not, these actions create problems worse than the mistake itself.
There is a better way. First, stop. Take a breath. Think.
Then, consider three simple steps to minimize risks and create a solid platform for moving forward to meet the obligations to the client and reduce the likelihood that a mistake will develop into a claim for legal malpractice.
1. Tell the Client About the Incident.
This first step is often the most difficult. For many reasons (involving both disciplinary and malpractice exposure), it is also one of the most important.
Remember, the decision not to tell the client about a mistake is no less a decision that the attorney may have to defend at a later date. When viewed through the prism of conflicts of interest, most juries view it as a decision to put the interests of the lawyer (i.e., hopes of fixing it, or that the client will never find out) above the interests of the client. That silence can be quite costly and can even extend the statute of limitation for a claim.
In many cases, the risks of nondisclosure far outweigh the risks of telling the client. This does not mean that attorneys should fall on the sword and agree to pay damages. Importantly, telling the client about the incident is very different than admitting that a mistake has been made or admitting that malpractice has occurred.
Most legal malpractice policies contain provisions (typically called “No Admission” clauses) that forbid a lawyer from admitting a mistake or agreeing to pay money without jeopardizing her or his legal malpractice coverage. As a result, the disclosure to the client can instead be very factual, describing what has happened and what the risks are, such as “we filed the brief after the deadline, which means our request may be denied as untimely.”
The ultimate legal conclusion, i.e., whether it is legal malpractice, is best left out of the notification. Indeed, some attorneys have uncovered a mistake, told a client that their mistake constituted malpractice, and then learned later that the mistake did not otherwise support a claim for malpractice (either because it was fixable or there were other defenses, such as a lack of causation). If a claim is brought after such an admission, the attorney is starting out at a significant disadvantage.
2. Involve the Legal Malpractice Insurance Company.
Many attorneys believe that it is better to wait for the claim (typically defined as a ‘written demand for money or damages’) or a lawsuit before involving their legal malpractice insurer. However, there may be advantages to involving the insurer at an earlier date.
Most legal malpractice policies are “claims made” or “claims made and reported” policies. This means that the policy covers claims against lawyers that are made (and if required, reported to the insurance company) during the policy period. As a result, the important date is when the claim is made.
However, most policies also permit a potential claim to be reported as soon as the lawyer learns about any basis upon which a claim could be made, including a simple mistake. In legal malpractice insurance nomenclature, such a report is called “notice of a circumstance.”
By giving notice of a circumstance, a lawyer may assure coverage in the event that a claim is made or lawsuit is filed, regardless of when that occurs.
Also, by providing notice of a circumstance, attorneys can avoid some tricky issues in the renewal process for their malpractice insurance. Many applications ask if any attorney applying for insurance is aware of a circumstance that might give rise to a claim. Attorneys who have not already reported the circumstance then face the potential obligation to do so in response to the application question. The failure to report a potential claim in an application for coverage or renewal can put coverage for the entire firm at risk.
Once the malpractice insurer is involved, the attorney can provide the client with the contact information for the professional liability insurance carrier.
3. Consider Whether the Client Should Consult Other Counsel Regarding the Incident.
Inevitably, upon learning of a mistake or error, the client will ask what the attorney thinks the client should do. At this point, there may be a conflict. The attorney may be tempted to advise the client in a way that minimizes the attorney’s mistake, rather than maximizes the client’s interests.
Even when a course of action would both minimize the attorney’s mistake and maximize the client’s interests, it may be difficult for the attorney to later rebut the suggestion that the attorney was not acting in the client’s best interests. This is a fact scenario that may look bad to a jury hearing a legal malpractice case. And, where there are allegations that an attorney acted notwithstanding a conflict of interest, it raises the question of whether punitive damages are appropriate.
Accordingly, in such situations, attorneys may consider whether to recommend that the client seek independent advice regarding what to do next. At this point, the attorney may also have the benefit of advice from his or her own counsel or the firm’s general counsel.
Good things can happen when simple, effective steps are taken instead of panicking.