A legal malpractice insurance claim is something no attorney wants to come face to face with. A claim can cost you time, money, and even your reputation.
At Protexure Insurance Agency we often get the question, “How likely am I to have a claim?” This is a tough question to answer. While some practice areas are inherently riskier, there is no magic equation that calculates your likelihood of facing a legal malpractice claim.
Rather than focusing on the unknown, we encourage attorneys to learn more about the possible claim scenarios out there. We want to give attorneys the opportunity to learn from others' mistakes in hopes that they will never run into a situation where you need to file a claim.
When looking back at a decade of claims data, we have identified a common scenario that affects trust and estates attorneys. With the help of our claims team, we have provided a detailed claim scenario as well as tips on how to avoid this type of claim.
Trust and Estates Claim Example
Attorney Daniel Smith had been working with the Jones family for many years, serving as counsel to John Jones, and his wife Alice, and helped create a Trust for them. Attorney Smith worked with the Joneses to amend the Trust, which was signed by both of the Jones children, Jennifer and Stacey, as co-Trustees.
Mrs. Jones passed away approximately 5 years after the first amendment to the Trust was executed. Following Mrs. Jones’s passing, Stacey and her father stopped speaking.
Mr. Jones and Jennifer stopped by Attorney Smith’s office several times over the next two years to discuss the Trust. Mr. Jones expressed his wish to minimize Stacey’s inheritance and even discussed disinheriting Stacey entirely. Mr. Jones appeared forgetful and stumbled over his words.
Jennifer was always there to help her father understand what was going on.
Attorney Smith prepared a Second Amendment to the Trust, removing Stacey as a Trustee, and leaving Jennifer as the sole Trustee. Under the Second Amended Trust, the assets were still to be distributed equally between Jennifer and Stacey in the event of Mr. Jones’s death.
Three years later Mr. Jones and Jennifer both appeared in Attorney Smith’s office, at which time the Trust was amended for the third time, this time altering the distribution to 60% for Jennifer, who had become Mr. Jones’s full-time caretaker, and 40% for Stacey, who still had a virtually nonexistent relationship with her father.
The Trust was amended two more times, culminating in the fifth and final amendment to the Trust in which Mr. Jones expressed his wishes to leave everything to Jennifer and to specifically include a provision disinheriting Stacey.
Mr. Jones died. The assets of the Trust were significant, including at least 10 parcels of commercial real estate, with a value of over $15 million. Within one week after her father’s passing, Jennifer contacted Attorney Smith expressing concern that the Trust would be challenged, and sure enough, one month after her father’s death, Stacey Jones instituted a lawsuit challenging all of the Trust Amendments following the First Amended Trust.
Stacey alleged that the Trust should be rendered invalid because Jennifer Jones wielded undue influence over Mr. Jones, isolated Mr. Jones from the rest of his family, and also that Mr. Jones had long ago been diagnosed with dementia and lacked the appropriate capacity to alter the Trust.
The litigation was long and drawn out, and during the litigation, it came out Mr. Jones had been diagnosed with dementia one year after his wife’s passing and had been steadily deteriorating since that time. Ultimately, Jennifer decided to settle by offering Stacey assets from the Trust worth approximately $6.5 million.
Jennifer Jones then instituted a legal malpractice lawsuit against Attorney Smith with regard to the services rendered in connection with the Trust amendments. Specifically, she alleges that Attorney Smith committed malpractice in failing to appropriately disclose conflicts of interest, and was negligent in allowing Jennifer to continually be in the room when he was preparing the Trust Amendments for Mr. Jones. Jennifer argues that but for Attorney Smith’s conduct, the Trust could not have been questioned, and she would have been entitled to the full $15 million.
Lessons Learned From This Common Claim Scenario
Unfortunately, the scenario above is all too common to Will Trust and Estates attorneys. But, our hope is that you never have to experience a claim for challenging situations such as this one. Below we have included lessons that can be learned from this claim scenario and a few items to consider for your own law firm.
- When a family member/beneficiary is disinherited, it will almost always result in the instrument being challenged in probate. How well documented are your files, keeping in mind it can be years, if not decades before the matter is probated?
- Do you maintain a record and notes from every meeting?
- Do you have other witnesses in the room?
- Were you surprised that it was Jennifer and not Stacey who ended up suing Attorney Smith? No matter how close to a client or to a client’s family you may be, or for how long you have known them, it is essential to treat every client the same and not make any allowances, no matter how harmless it may seem.
- When speaking with clients, what is your procedure to determine if capacity has become or is becoming an issue? What do you do to document it?
- Is there a conflict? If the answer is no, could a conflict be perceived? In this example, while not necessarily a breach of the standard of care, it would have been best for conflicts to have been addressed and waived and to have had it all appropriately documented in the file.
