Fall 2007 issue of Horizons

INDUSTRy u

LEGAL

Risk Management for Law Firms Every attorney knows that the practice of law can give rise to legal malpractice claims. Research indicates that claims against lawyers are increasing in both frequency and severity. Many firms mitigate the risk of legal malpractice claims by obtaining professional liability insurance. However, legal malpractice can severely damage a firm’s reputation and ultimately the firm’s success as a business. Damage to a firm’s reputation is not compensated by professional liability insurance. This issue of Horizons is dedicated to “knowledge.” In order to avoid malpractice claims, a firm needs to be knowledgeable as to why such claims arise and establish an effective program to avoid such claims.

to a proactive risk management program at every stage of an engagement – from client acceptance, delivering services and ending representations – can decrease the likelihood that the firm will be subject to a malpractice claim. Client Selection Proper risk management begins with client selection. When dealing with potential clients, lawyers should consider the following: • Develop a conflict of interest system with a database of information that includes former clients, current clients, adverse parties and any other necessary information useful in identifying potential conflicts. • Conflicts should always be checked BEFORE accepting a new client. • Use engagement letters at the beginning of an engagement to establish the scope of services to be provided. Be sure to include termination provisions in engagement letters as well. • Accept cases only within the firm’s area of expertise. If a case is outside the firm’s area of expertise, refer the client to another professional with experience in that type of law.

The key to avoiding malpractice losses is to establish proactive risk management procedures. Firms committed

33 u winter 2007 issue