The value of a well-timed client referral is unmistakable, especially for fast-growing law firms. However, lawyers who prioritize financial gain over their client’s best interests with referrals can cause considerable damage to themselves, their firm and the legal profession.
We saw this play out last year when the Missouri Supreme Court suspended the license of Kansas City lawyer Todd Agron for violating multiple rules of professional conduct, including alleged involvement in a referral scheme. Court documents indicate Agron paid nearly $77,000 to runners who worked on behalf of a referral service. They also allege Agron solicited another attorney’s client.
Weighing the potential pitfalls
While Agron had his license suspended, unethical referrals can create additional consequences, including reprimands, significant fines and even disbarment. Additionally, they can trigger a never-ending cascade of fee disputes among attorneys. Perhaps most importantly, improper referrals accentuate many of the negative stereotypes about lawyers, further betraying confidence with clients and the public at large.
To mitigate these risks, law firms must maintain the highest ethical referral standards in accordance with the ABA Model Rules of Professional Conduct. Above all, lawyers must ensure referrals are made with their clients’ best interest in mind, emphasizing transparency and accountability at every step. Certain practices, such as soliciting another attorney’s client or sharing legal fees with non-lawyers, must be avoided at all costs.
Hardwiring ethical referral obligations into professional practice
Properly managing and vetting referrals requires continuous rigor. Consider the following four ways firms can commit themselves to the highest standards of professional respect and fairness:
- Create clear guardrails around referrals. Establish detailed, written referral policies that document the firm’s criteria for selecting referrals, its procedures for obtaining informed consent from clients, and its methods for tracking referrals.
- Perform due diligence. Assess the competence, experience and ethics of any attorneys to whom clients are referred so you’re confident they will act in your client’s best interests.
- Document every step. Track and maintain records of all referrals, including client consent forms and compensation received.
- Perform routine referral reviews. Evaluate your processes at least annually and update them to ensure they comply with any changes in ABA or State Bar rules.
Defending your firm
Referrals are like any other relationship, which unfortunately means they can turn negative even if firms act with integrity. A professional liability insurance policy can protect firms from claims of malpractice, negligence or client harm resulting from alleged or actual improper practices surrounding referrals. An insurance professional with in-depth knowledge of the legal profession can also provide risk mitigation resources to help firms reduce their risk.
However, while insurance protects a firm financially, it does not absolve attorneys from their ethical obligations. Firms must lead the way by following best practices and maintaining ethical rules with every referral. Learn more about First Indemnity’s Professional Liability Insurance options via https://firstindemnity.net/insurance-products/professional-liability/.