If you’ve filled out a legal malpractice insurance application, you are already aware of the number of questions to be answered before obtaining an insurance policy.
Most insurance applications begin by requesting some basic information about your law firm, as well as the limits of liability and deductible options you are seeking. As you progress through the application, the questions become more and more detailed. As you dive deeper into an insurance application, you may notice specific questions about how you manage your law practice.
Did you know you can use these application questions as a tool for risk control?
Not only does a legal malpractice application lead you to purchase all of the protection being insured presents, but it provides quite a bit of guidance about the most important risks you face and the ways you can address them. Even a quick skim of the application shows which risks—and which risk control techniques—matter most for lawyers and insurers.
The use of a central calendar or docket control system
Insurers always ask about your use of central calendars or docketing systems because some of the most common malpractice claims are complaints that the lawyer missed a crucial deadline in a matter, resulting in harm to the client.
Understanding the importance of various deadlines—especially in litigation, but in transactional work as well—is one of the basic reasons clients seek legal help, and thus it is often easy to connect a missed deadline to harm, making these claims difficult to defend.
Insurers ask about your central docketing systems because they know that having a system that tracks deadlines and helps everyone in the firm to plan to meet them in plenty of time—including a process that ensures at least two people are aware of what needs to be done and when—is the single most effective risk control tool for avoiding these types of claims.
The use of Engagement and Non-Engagement Letters
Insurers ask about your consistent use of both types of letters because a significant portion of legal professional liability claims can be traced to the client and lawyer having different expectations or understandings about their interactions.
Engagement letters that clearly define the scope of work the lawyer plans to do and not do and also specifically identify who is and is not the client help avoid such misunderstandings. Well-written engagement letters and non-engagement letters offer strong defenses against these types of claims.
The use of Conflicts checking systems
Every application includes questions about your conflicts checking process because insurers know that if you end up in a conflict position, you are more likely to face a problem with any of the clients that are part of that conflict. And because conflict avoidance is an essential legal ethical principle, it is that much more difficult to defend a lawyer against a claim that arises from one. Regular use of a comprehensive conflicts database is key to avoiding these problems.
Procedures and Policies For Handling Client Funds and Property and Fee Collection
The fact that every legal malpractice insurance application includes questions about fee collection activity and policies and procedures for handling client funds and property shows the important connection between money matters and the risk of malpractice claims. Suing a client for unpaid fees gives them a reason to defend with a claim that you failed to earn those fees; if you have systems in place to help avoid the need to bring fee actions you necessarily lower that risk.
Similarly, clients are more likely to raise complaints and claims—and those issues will be more difficult to resolve—when they lose money or property they entrusted to you, making good policies and procedures particularly important for avoiding risk.
Beyond highlighting specific systems and procedures that provide important risk control, legal malpractice insurance application questions can also provide some insight into which types of clients and practice areas are riskier than others.
For instance, most applications will ask whether you represent public figures. This is because if any problem arises with their representation are likely to face more scrutiny, making defense that much more fraught.
Other hints of risky types of practices or clients include that applications usually want to know if you ever do work for publicly traded companies or for organizations in which you or someone from your firm is on the board or has an ownership stake.
While every application requires a breakdown of all of your areas of practice, the fact that applications often have special questions about these types of clients indicates that insurers consider them to present a higher risk.
So, next time you fill out a legal malpractice insurance application, consider it an opportunity to evaluate your practices and procedures against the guidance those application questions provide.
