By understanding the most common sources of legal malpractice claims, attorneys can take proactive steps to address issues before claims arise. In addition, attorneys in practice areas with a high incidence of malpractice claims can remain especially vigilant and avoid some of the common pitfalls that lead to problems for attorneys in their practice area.
One of the resources for assisting attorneys in this regard is the American Bar Association Profile of Legal Malpractice Claims (the ABA Profile), which provides comprehensive data regarding legal malpractice claims, including the short and long-term trends with respect to such claims.
The ABA Profile is published every four years by the ABA Standing Committee on Lawyers’ Professional Liability (full disclosure: Shari Klevens is the chair of the committee) and employs data collected from professional liability insurance carriers in the United States and Canada. The most recent version contains data for claims from 2012 to 2015 and reflects some new trends in legal malpractice claims while reinforcing a number of the common themes that appear in study after study. Below are some notable findings from the latest study.
Calendaring Is Key
Although attorneys typically devote significant effort to ensuring that they get the substance of the law right in their legal matters, it is administrative errors that give rise to a substantial percentage of overall legal malpractice claims. Indeed, the 2012 to 2015 ABA Profile found that over 20 percent of all legal malpractice claims were attributable to administrative errors. More specifically, these claims often arise from clerical errors, the failure to timely file documents, or the failure to calendar properly.
While much has been written (including in this column) about how effective administrative policies and procedures can limit a law firm’s risks, the data from the ABA Profile puts the importance of such policies and procedures in stark terms. Indeed, attorneys who fail to devote sufficient attention to administrative issues may be surprised to learn that claims arising out of those issues can and do happen. Moreover, administrative errors are typically preventable. Further, even for those administrative errors that occur despite an attorney’s best efforts, having administrative systems in place can help defend against allegations that a single administrative error evidences the attorney’s overall carelessness.
The good news is that, while administrative errors remain a common source of legal malpractice claims, the number of claims arising out of such errors has actually decreased slightly over the last several years. One possible explanation is the explosion in technology specifically created to assist attorneys with clerical tasks. For example, user-friendly calendaring systems and docketing software are widely available and can help avoid the dreaded missed deadline. As this technology becomes increasingly integrated into law firms, claims arising out of administrative errors may continue to decline.
Trends by Area of Law
The trends in malpractice claims by area of law is always of particular interest as it is can be reflective of broader economic or societal issues. For example, in prior studies examining the years after the housing crash in 2008-2009, real estate law was the greatest source of legal malpractice claims. However, while there are still a significant amount of real estate claims, the number of such claims has declined in recent years. One theory for this decline is that real estate claims are tapering off as the economy improves and the statute of limitations expires on any remaining claims arising out of or relating to the housing crisis.
The recovery from the financial crisis may also explain the data in the ABA Profile reflecting an increase in legal malpractice claims in the area of family law. Because studies often show that divorce rates decrease during times of poor economic conditions, the claims against family law attorneys may now be normalizing as the economy improves and divorce rates return to normal levels.
Another noteworthy trend in this regard is the increase in claims against lawyers performing estate, trust, and probate work. One explanation is that the Baby Boomer generation is retiring in greater numbers and relying on estate or trust funds for their own living (or to provide for future generations). Attorneys who perform estate, trust, and probate work can often face claims from a third-party, such as a disgruntled beneficiary, who may seek to blame the lawyer who drafted the will, especially where the assets of an estate are less than anticipated.
The Resolution of Legal Malpractice Claims
Legal malpractice insurers and attorneys alike closely follow the trends in the ABA Profile regarding the disposition of claims. In particular, in recent years, insurers have observed that the average costs of defending legal malpractice claims has increased significantly. In a possibly related finding, the ABA Profile showed a decrease in the amount of claims settled with no indemnity payment to the claimant. Given the increased defense costs, the statistics may reflect that insurers have been more willing to enter into settlements for some value than to incur the expense of defending the claim.
The ABA Profile also reflects an increase in the amount of loss paid by insurers in connection with legal malpractice claims, which is typically referred to as the “severity” of claims. Despite the increase in awareness of risks and potential tools for claim prevention, the reality is that claims are becoming more expensive to settle, try, and defend.
Nonetheless, with a greater understanding of the sources of and trends in legal malpractice claims, attorneys can anticipate and attempt to limit the greatest risks for claims. A wealth of additional information is available in the complete ABA Profile, which is available for purchase at http://shop.americanbar.org.
Shari L. Klevens is a partner at Dentons US and serves on the firm’s US Board of Directors. She represents and advises lawyers and insurers on complex claims, is co-chair of Dentons’ global insurance sector team, and is co-author of “California Legal Malpractice Law” (2014). Alanna Clair is a partner at Dentons US and focuses on professional liability defense. Shari and Alanna are co-authors of “The Lawyer’s Handbook: Ethics Compliance and Claim Avoidance.”