A majority of attorneys hold themselves to the highest standards and follow the ethical guidelines set forth by their state. Yet during their careers, nearly all lawyers will face at least one complaint of unethical conduct. When that compliant comes, will you be ready?

The reality is that most attorneys don’t think about the disciplinary process until they are in it, and by then, it’s too late. That’s why you should know the process, understand the risks, and protect yourself now.

Common types of ethics complaints

While intentional malfeasance makes headlines, the majority of ethics complaints against lawyers come from run-of-the-mill problems, according to the ABA Journal. These include:

Failing to properly communicate with clients, such as not returning phone calls promptly or not sending written termination letters.

Disputes over fees, often because the attorney’s fee agreement wasn’t disclosed in writing to the client.

Bouncing a check. The laws regarding IOLTA (Interest on Lawyer Trust Accounts) are complex, and funds are easy to mishandle. If that happens, it triggers an automatic discipline report in some states.

Conflicts of interest. This can be especially tricky for firms with multiple partners who fail to communicate with one another.

What happens when a complaint is filed

Disciplinary proceedings vary by state. Many process complaints through a State Bar. Others do so through a court of law, while others use statewide grievance committees or offices. And while each state’s processes differ slightly, there are common themes.

Once you receive a notice of complaint, you must respond. If you fail to do so, a disciplinary action could be made against you by default. After you respond, the disciplinary board will proceed as needed. Steps could include continued investigation, the issuing of subpoenas to review case files, and/or depositions. The disciplinary board will then take action, which may include a letter of caution, a private reprimand, or the filing of formal charges of misconduct, the latter of which could lead to censure, suspension or disbarment.

How to protect yourself

If you receive a disciplinary complaint, you will not be able to stay objective. You will need to hire outside counsel to represent you.

Whether you’re a solo practitioner, an associate or a partner in a mid-size or large firm, you should also be proactive. Make sure your firm’s professional liability policy includes disciplinary proceedings coverage. It will provide coverage for any inquiry or proceeding by a regulatory or licensing board, peer review committee, disciplinary official or state/federal agency for any charges alleging misconduct. It will not cover any fines, penalties or sanctions made by a disciplinary board against an attorney.

I advise lawyers to look for disciplinary proceedings coverage with a $50,000 limit. That limit is separate from the existing policy limit. Look for coverage with a broad definition of a proceeding, which means it may pay $50,000 per proceeding and/or up to $100,000 for all proceedings within a calendar year.

No matter how ethical or detailed-oriented you are as an attorney, avoiding any and all disciplinary proceedings can be near impossible. By understanding your state’s disciplinary process and obtaining proper coverage, you will reduce your personal stress and be well prepared to defend your license if needed.

The number of malpractice claims filed against attorneys has remained steady year-over-year, according to Ames & Gough’s 2018 Lawyer’s Professional Liability Insurer Survey. That’s the good news.

Here’s the bad news: The cost of defending these claims continue to rise due to increasing attorney’s fees, rising discovery costs, and the overall complexity of these cases. All nine insurers surveyed had claims with reserves over $500,000 in 2017. Five major insurers reported paying a claim of $50 million or more, while one paid out more than $150 million.

In our work providing lawyers’ professional liability products at First Indemnity Insurance Group, we find that the average amounts to defend a solo practitioner range from between $25,000 to $80,000, and the average for small- to midsize firms could easily run $100,000 and above.

Yet many common claims can be prevented. Here are the top three claims we see, and ways to avoid each one:

1.Failing to calendar. According to the American Bar Association’s Standing Committee on Lawyer’s Professional Liability, more than one-third of legal malpractice claims filed from 2012-2015 involved calendar and docketing errors. These include issues like failure to file, improper calendaring, failure to know or learn deadlines, lack of follow-up, failure to react to a court calendar, and clerical errors. In this area, small firms represent the majority of all claims.

How to prevent it: Maintain at least two forms of docketing within your firm, and make sure both are properly synced. Take advantage of cloud technology that allows you to keep your calendar on your smartphone or other devices at all times, and to update it from wherever you are. Use online court date calculators to ensure you don’t miss key filing dates. And make sure everyone in your firm understands your calendaring protocol and knows who is responsible for keeping everything on schedule.

2.Conflicts of interest. This category includes claims filed for both conflict of interest and perceived conflict of interest, and a lawyer can face them whether or not they knew about the conflict.

How to prevent them: Do your due diligence. Run a conflict of interest check for any client, former client, subsidiary of that client or family member. Do the same for any witnesses or co-parties in any cases. Make sure any potential conflict found is documented and resolved. If you’re in a firm with several partners, make it mandatory for those partners to have regular conflict of interest meetings so everyone knows which new clients are coming on board and can identify any potential conflicts.

3.Fee disputes. As attorneys’ fees rise, so do your clients’ concerns. While some clients file claims about exorbitant fees, most claims boil down to a lack of communication about the fee.

How to prevent them: Send a written letter of engagement and a fee agreement to all clients that explain precisely what your professional services are, and what they are not. Include a fee schedule for full transparency. Take a retainer, and institute monthly billing. And we highly recommend against lawyers suing a client over a fee. In such cases, the client will most often counterclaim professional negligence to avoid paying the fee. If that happens, it will trigger your professional liability policy deductible and will lead to an automatic 15% claim surcharge for five years. A wiser approach may be fee arbitration or mediation if you practice in a state where such a process exists.

The costs of professional liability claims continue to rise even as the number of claims holds steady. Taking these simple steps can help you avoid these claims, save you money, and most of all, save you time and headaches.

The number of malpractice claims filed against attorneys has remained steady year-over-year, according to Ames & Gough’s 2018 Lawyer’s Professional Liability Insurer Survey. That’s the good news.

Here’s the bad news: The cost of defending these claims continue to rise due to increasing attorney’s fees, rising discovery costs, and the overall complexity of these cases. All nine insurers surveyed had claims with reserves over $500,000 in 2017. Five major insurers reported paying a claim of $50 million or more, while one paid out more than $150 million.

In our work providing lawyers’ professional liability products at First Indemnity Insurance Group, we find that the average amounts to defend a solo practitioner range from between $25,000 to $80,000, and the average for small- to midsize firms could easily run $100,000 and above.

Yet many common claims can be prevented. Here are the top three claims we see, and ways to avoid each one:

1.Failing to calendar. According to the American Bar Association’s Standing Committee on Lawyer’s Professional Liability, more than one-third of legal malpractice claims filed from 2012-2015 involved calendar and docketing errors. These include issues like failure to file, improper calendaring, failure to know or learn deadlines, lack of follow-up, failure to react to a court calendar, and clerical errors. In this area, small firms represent the majority of all claims.

How to prevent it: Maintain at least two forms of docketing within your firm, and make sure both are properly synced. Take advantage of cloud technology that allows you to keep your calendar on your smartphone or other devices at all times, and to update it from wherever you are. Use online court date calculators to ensure you don’t miss key filing dates. And make sure everyone in your firm understands your calendaring protocol and knows who is responsible for keeping everything on schedule.

2.Conflicts of interest. This category includes claims filed for both conflict of interest and perceived conflict of interest, and a lawyer can face them whether or not they knew about the conflict.

How to prevent them: Do your due diligence. Run a conflict of interest check for any client, former client, subsidiary of that client or family member. Do the same for any witnesses or co-parties in any cases. Make sure any potential conflict found is documented and resolved. If you’re in a firm with several partners, make it mandatory for those partners to have regular conflict of interest meetings so everyone knows which new clients are coming on board and can identify any potential conflicts.

3.Fee disputes. As attorneys’ fees rise, so do your clients’ concerns. While some clients file claims about exorbitant fees, most claims boil down to a lack of communication about the fee.

How to prevent them: Send a written letter of engagement and a fee agreement to all clients that explain precisely what your professional services are, and what they are not. Include a fee schedule for full transparency. Take a retainer, and institute monthly billing. And we highly recommend against lawyers suing a client over a fee. In such cases, the client will most often counterclaim professional negligence to avoid paying the fee. If that happens, it will trigger your professional liability policy deductible and will lead to an automatic 15% claim surcharge for five years. A wiser approach may be fee arbitration or mediation if you practice in a state where such a process exists.

The costs of professional liability claims continue to rise even as the number of claims holds steady. Taking these simple steps can help you avoid these claims, save you money, and most of all, save you time and headaches.

Andrew Biggio is the founder and president of First Indemnity Insurance Group, which provides professional liability insurance for attorneys, tax prep accountants, CPAs and bookkeepers. First Indemnity is headquartered in Lynn, Massachusetts (near Boston), with additional offices in New York, Chicago, Dallas, Los Angeles, Philadelphia and Tampa, Florida.

Whether posing as a client, a trusted vendor or even the law firm itself, these scammers assume the identity of a known agent or party familiar to the firm, including firm administrators. Using a trusted person’s email, the scammer will contact someone within the firm and provide information that generally appears legitimate. These scammers will send emails that include wire instructions or changes to wire instructions, directing the recipient to transfer funds to a noted account. Once those funds have transferred, the scammers will typically begin moving the money around, making it difficult if not impossible to trace and recoup lost funds.

In addition to plying these schemes through email, some criminals will be so bold as to call the law firm directly with wiring instructions, again posing as representatives of trusted business organizations or parties to a transaction. Some have gone even further, sending imposters physically to law firm offices to conduct the fraud. Once there, they pose convincingly as parties to a business transaction or even as someone working for the law firm. They also can pose as someone working for a law firm representing other parties to a transaction and provide seemingly legitimate instructions for the electronic distribution of funds. When the dollars are substantial enough, these fraudsters do not lack for gumption.

Steps You Can Take

As instances of wire fraud continue to grow, law firms must be more vigilant to ensure they do not become victims to these schemes.

Every law firm should have documented, verifiable call-back procedures in place to substantially reduce the risk of fraudulent transaction activity. Employing comprehensive data encryption and use of safe pass programs for financial transactions are additional, standard steps law firms should take to protect themselves and their clients. Regular updates to all firm software is also a basic but critical recommendation. Often software updates include patches related to known data security issues – issues scammers look for when hacking into law firm computer systems and email programs.

In addition, law firm leaders should not only have a solid understanding of their own wire fraud prevention measures, but those of third-parties with whom they work. This includes banks, title companies and so forth. Quarterly screening and review of the firm’s wire fraud protection efforts, and those of their third-party vendors, is strongly recommended.

And because these fraudsters don’t simply avail themselves of attorney vulnerabilities, law firms have a duty to educate their clients involved in any financial transaction the firm is handling. Following similar advice as above, firms should caution clients to update their software and verbally verify any transaction requests directly with their attorney before they take any action. Clients should also be on the lookout for red flags such as outside parties directing them to take certain actions or receiving changes to previously agreed upon account numbers for wire transfer agreements, etc. And while not completely fool-proof themselves, sometimes something as simple as using a standard bank draft or check rather than a wire transfer is just the sort of thing that can derail the well-laid plans of these wire fraud schemers.

We’ve Got You Covered

While wire transfer fraud can be a significant exposure for law firms, to date many insurers have kept quiet on the issue as they evaluate the exposure itself.

First Indemnity Insurance Group takes a different approach. Working directly with law firms and attorneys, our philosophy is that your defense is our focus. As such, our broad definition of attorney/covered services contains a larger scope of covered parties and coverage limits, and this often includes wire transfer fraud coverage.

From the moment a First Indemnity client reports a wire fraud transaction, we deploy an entire team to come to the defense of the firm.

A remediation team is typically deployed within the first 8 hours of the report of a fraudulent transaction in an effort to track the funds and, if possible, recoup the finances in question. Timely reporting of the fraud is critical to the viability of this effort.

Next, and often in tandem with the remediation team, our forensic team begins the task of identifying where the breach in your firm’s security took place. The forensic team will identify the breach, patch or repair the breach and conduct a system-wide threat analysis to determine any other additional vulnerabilities that need to be addressed.

Often, our coverage includes access to a crisis coach who can best advise law firms on client notification, needed changes to operational procedures and other general post-fraud business operations advice. First Indemnity’s wire fraud policy protection also often includes coverage for the hiring of a public relations agency to mitigate any reputation damage to your firm caused by related media coverage, as well as coverage for legal fees should the firm find itself threatened by resulting legal action. These latter options are typically bundled in with our cyber liability coverage.

Ensure You’re Insured

The American Bar Association advises attorneys seeking to better protect themselves and their firms from fraudulent financial transactions “review their business-related insurance policies … to determine what, if any, insurance options might be available to provide coverage (indemnity or defense) relating to claims arising from Internet related scam activities.”

By contacting First Indemnity, you can remove the middleman and speak directly to underwriters who intimately understand the coverage we provide, taking the guess work out of what is in your policy. Moreover, buying direct from First Indemnity removes third-party broker fees, ensuring the coverage provided is not only fully explained by experts, but more affordable as well.

For more information about protecting your firm, your attorneys and your clients, please call or email Andrew A. Biggio, Program Manager at First Indemnity at (781)581-2508) or abiggio@firstindemnity.net.

Whether posing as a client, a trusted vendor or even the law firm itself, these scammers assume the identity of a known agent or party familiar to the firm, including firm administrators. Using a trusted person’s email, the scammer will contact someone within the firm and provide information that generally appears legitimate. These scammers will send emails that include wire instructions or changes to wire instructions, directing the recipient to transfer funds to a noted account. Once those funds have transferred, the scammers will typically begin moving the money around, making it difficult if not impossible to trace and recoup lost funds.

In addition to plying these schemes through email, some criminals will be so bold as to call the law firm directly with wiring instructions, again posing as representatives of trusted business organizations or parties to a transaction. Some have gone even further, sending imposters physically to law firm offices to conduct the fraud. Once there, they pose convincingly as parties to a business transaction or even as someone working for the law firm. They also can pose as someone working for a law firm representing other parties to a transaction and provide seemingly legitimate instructions for the electronic distribution of funds. When the dollars are substantial enough, these fraudsters do not lack for gumption.

Steps You Can Take

As instances of wire fraud continue to grow, law firms must be more vigilant to ensure they do not become victims to these schemes.

Every law firm should have documented, verifiable call-back procedures in place to substantially reduce the risk of fraudulent transaction activity. Employing comprehensive data encryption and use of safe pass programs for financial transactions are additional, standard steps law firms should take to protect themselves and their clients. Regular updates to all firm software is also a basic but critical recommendation. Often software updates include patches related to known data security issues – issues scammers look for when hacking into law firm computer systems and email programs.

In addition, law firm leaders should not only have a solid understanding of their own wire fraud prevention measures, but those of third-parties with whom they work. This includes banks, title companies and so forth. Quarterly screening and review of the firm’s wire fraud protection efforts, and those of their third-party vendors, is strongly recommended.

And because these fraudsters don’t simply avail themselves of attorney vulnerabilities, law firms have a duty to educate their clients involved in any financial transaction the firm is handling. Following similar advice as above, firms should caution clients to update their software and verbally verify any transaction requests directly with their attorney before they take any action. Clients should also be on the lookout for red flags such as outside parties directing them to take certain actions or receiving changes to previously agreed upon account numbers for wire transfer agreements, etc. And while not completely fool-proof themselves, sometimes something as simple as using a standard bank draft or check rather than a wire transfer is just the sort of thing that can derail the well-laid plans of these wire fraud schemers.

We’ve Got You Covered

While wire transfer fraud can be a significant exposure for law firms, to date many insurers have kept quiet on the issue as they evaluate the exposure itself.

First Indemnity Insurance Group takes a different approach. Working directly with law firms and attorneys, our philosophy is that your defense is our focus. As such, our broad definition of attorney/covered services contains a larger scope of covered parties and coverage limits, and this often includes wire transfer fraud coverage.

From the moment a First Indemnity client reports a wire fraud transaction, we deploy an entire team to come to the defense of the firm.

A remediation team is typically deployed within the first 8 hours of the report of a fraudulent transaction in an effort to track the funds and, if possible, recoup the finances in question. Timely reporting of the fraud is critical to the viability of this effort.

Next, and often in tandem with the remediation team, our forensic team begins the task of identifying where the breach in your firm’s security took place. The forensic team will identify the breach, patch or repair the breach and conduct a system-wide threat analysis to determine any other additional vulnerabilities that need to be addressed.

Often, our coverage includes access to a crisis coach who can best advise law firms on client notification, needed changes to operational procedures and other general post-fraud business operations advice. First Indemnity’s wire fraud policy protection also often includes coverage for the hiring of a public relations agency to mitigate any reputation damage to your firm caused by related media coverage, as well as coverage for legal fees should the firm find itself threatened by resulting legal action. These latter options are typically bundled in with our cyber liability coverage.

Ensure You’re Insured

The American Bar Association advises attorneys seeking to better protect themselves and their firms from fraudulent financial transactions “review their business-related insurance policies … to determine what, if any, insurance options might be available to provide coverage (indemnity or defense) relating to claims arising from Internet related scam activities.”

By contacting First Indemnity, you can remove the middleman and speak directly to underwriters who intimately understand the coverage we provide, taking the guess work out of what is in your policy. Moreover, buying direct from First Indemnity removes third-party broker fees, ensuring the coverage provided is not only fully explained by experts, but more affordable as well.

For more information about protecting your firm, your attorneys and your clients, please call or email Andrew A. Biggio, Program Manager at First Indemnity at (781)581-2508) or abiggio@firstindemnity.net.

The next major hurdle in client acquisition and retention for law firms will be data security.

According to the American Bar Association’s 2017 Legal Technology Survey, 22 percent of law firms surveyed experienced a data breach. That’s an increase of 14 percent from the prior year.

Clients of all kinds, from large corporations dealing with global financial matters to elderly couples seeking estate planning services are increasingly demanding their law firms demonstrate they are taking a proactive approach to cyber security, and more specifically, protecting client’s data.

Even small law firms hold considerable confidential client information that, if a breach occurred, can cause irrevocable harm to the firm’s clients and permanently stain the reputation of the firm. Firms handling corporate matters, merger and acquisition transactions, personal injury cases and patent and intellectual property firms can be particularly at risk.

The ABA’s Legal Technology Survey found firms with 50 or fewer attorneys were most frequently attacked by hackers, followed by firms with fewer than 100 attorneys and finally by firms of 10 attorneys or fewer. Fortunately, most of these hacking incidents in 2017 resulted in little or no evidence that client data was exposed.

One of the most common approaches for these hackers is to employ spear phishing schemes, designed to have unsuspecting members of the firm or their clients click on seemingly legitimate links within an email to unleash malicious code into the system. According to a survey by the Ponemon Institute, phishing schemes make up 43 percent of attacks on small businesses. That same survey found malware (35 percent), code injection (26 percent) and compromised or stolen equipment (25 percent) are the other means hackers use to breach the security of a small business, or in this case, a law firm.

Ransomware is another major and growing cyber security threat for firms. If hackers are able to gain access to the firm’s network, they can encrypt files and demand a ransom for removing the encryption and returning access to the files. Firms that are subject to ransomware attacks can find themselves completely cut off from client files, billing records and virtually any type of digital resource the firm provides – even email.

Preventative Measures

First and foremost, law firms of every type need to have a strong and proactive information technology or cyber policy, as well as the appropriate expertise to drive that policy. This might mean employing an in-house IT department or, at minimum, hiring an outside consultant to conduct a vulnerability analysis with recommendations for redress. And this policy should be reviewed and, when necessary updated, every six months.

At a more basic level, law firms need to stay on top of their software. Failing to update software on even a single firm computer can provide hackers the means to infiltrate and potentially cripple the entire law firm. Use of data encryption tools as well as antiviral software and virus scanning tools can help to more rapidly identify potential breaches or malicious software or code installed on firm systems. Training employees on the proper manner in which to update software, cloud-based or otherwise, is critical to ensuring the security of firm and client data alike.

Our firm also recommends encrypted, off-site data back-ups as well as physical security (i.e., premises alarms, policies regarding non-firm technology, etc.) be employed.

Where third-party vendors are concerned, law firms should inquire about and review those company’s cyber policies as well as their related liability insurance coverage.

Finally, cyber security training is fast becoming paramount for any organization tasked with the safety of critical information. Ensuring all members of the firm review and are familiar with any and all compliance guidelines and regulations is vital. Developing response plans and protocols for potential data breaches – so that everyone from the managing partner to the receptionist know what steps to take when a breach becomes apparent – will help minimize damage and set the stage for the best possible outcome from any data breach situation. In addition, ensuring the firm’s professional liability insurance adequately considers the firms risk and provides both the coverage and tools to mitigate that risk, can mean the difference between a negative event and a business-ending catastrophe.

Systemic Response

However, even law firms that take all of the necessary precautions and plan accordingly can never be 100 percent safe. The threats posed by hackers continue to evolve to meet and exceed barriers put before them by the cyber security industry.

That said, firms that have taken the proper precautions and employed the appropriate professional liability insurance coverage are best positioned to respond effectively.

Property insured law firms, should they experience a data security breach, will find a team of experts available to them within 24 hours of notification.

These firms, when reporting a cyber security breach, will first be contacted by a breach coach. This trained cyber expert will conduct a rapid review of the situation, and based on the firms existing cyber security plan and policies, deploy additional resources. This typically includes the deployment of a data breach team to fully review both the breach itself and the other technology and software systems of the firm.

The breach team will assess how the breach occurred, patch the system according to prevent further breaches, and conduct a thorough, up-to-date analysis of other areas of the firm’s technology infrastructure to identify any other existing or potential vulnerabilities.

Having appropriate insurance coverage also means the firm will be able to effectively finance and provide credit monitoring and identity theft restoration services, should they be required, to all those affected by the breach. This coverage also provides funds to hire a public relations and/or advertising agency to both mitigate any negative publicity that might result.

Practical Reality

No institution, not a law firm or a Silicon Valley tech company, is impervious to the risks posed by cyber crime. However, there are measures that can be taken as described here that not only are proactive to guard against a cyber breach, but also measures that ensure a swift, timely and appropriate response – with resources – to a breach should one occur.

Most law firms fail to grasp the risk they are exposing themselves and their clients to by not taking a proactive approach. And too often these same firms don’t realize that their existing professional liability insurance does not cover cyber security issues or might only represent one small aspect of a cyber security breach.

According to IBM’s 2018 Cost of a Data Breach study, the average data breach costs an organization approximately $3.86 million. More serious “mega breaches” can reach well into the hundreds of millions of dollars. That same study estimated that each record impacted by a data breach represents a cost of about $148 to the organization that is hacked. The loss or compromise of thousands or more records could be catastrophic to an average-sized law firm.

Having the right policies, the right training and the right insurance to deploy critical resources on day-one of a breach event is rapidly becoming standard operating procedure for businesses of nearly every size. Law firms are no different. A proactive approach to cyber security is the best, and only reasonable defense against the rising tide of cyber crime.

Our Program Manager, Andrew Biggio recently appeared on A.M. Best TV to discuss the professional liability market and how First Indemnity is uniquely positioned to thrive in the current environment.

Over the thirty years or so that I have represented lawyers, I have heard on many occasions that the trial judge made a mistake of law, and it was the judge’s error that caused the harm which forms the basis of the former client’s lawsuit against them.Texas, like many states has remained quiet on this point, until recently.Fortunately, for the lawyers in Texas there is now more hope that we can potentially argue in some situations, that the court’s legal error was what caused the client’s injury.

In Stanfield v. Neubaum,___S.W.3d___(Tex. 2016), the Texas Supreme Court took up the issue of whether judicial error could constitute a superseding cause that broke any causal connection between the lawyers alleged negligence and the injury to the client.Typically in these cases the lawyer is being sued for the appellate costs incurred by the clients second set of lawyers who handled the appeal and set aside the trial court’s complained of ruling. In Neubaum, the Texas Supreme Court found judicial error by the trial court could constitute superseding cause which could break the causal connection for a legal malpractice action when the judicial error was not reasonably foreseeable under all of the circumstances, and the negligence of the attorneys, if any, is unrelated to the judicial error.

In Neubaum, in the underlying case, the lawyers were defending a claim of usury against the client.The lawyers filed a motion for summary judgment asserting that a usury cure letter was a bar to liability to the claim for usurious lending.The trial court denied the motion.At trial the lawyers did not put on evidence to support the usury cure defense, but instead as a strategy, opted to defend on the basis that an alleged agent who created the usurious charge was not the agent of the client.During trial, at the charge conference the lawyers objected to an actual or apparent agency submission arguing that there was no evidence to support an agency claim.The trial court overruled the objection and included an agency question in the jury charge.The jury found against the client for almost $4 million in damages and penalties.The agency issue was challenged in a motion for new trial filed by the lawyers, which motion was denied.New counsel for the client then pursued an appeal, and on appeal, after spending $140,000 in fees, the court of appeals set aside the judgment against the client on the basis that the agency issue should not have been put before the jury.

Despite the win on appeal with new counsel, the client turned around and sued the original lawyers for malpractice.In the malpractice case, the client sued the lawyers to recover the appellate counsel’s attorneys’ fees incurred during the appeal.The client’s theory was that the lawyers in the trial court should have pursued not only the agency defense during the trial, but also the usury cure defense.This approach to the practice of law is often referred to as a “belt and suspenders” approach. That is, if you have two defenses, you need to support two defenses on behalf of the client, even if the client should prevail on either defense.

In the malpractice case, the lawyers moved for a traditional motion for summary judgment on proximate cause and argued that the error of the trial court in allowing the agency issue to go to the jury was the superseding cause which broke the causal connection between any actions of the lawyers and the client’s injury. Because the lawyers had only moved on causation, the Supreme Court declined to address directly the issue of whether the lawyers had a duty to put on evidence of both defenses.Thus, we do not directly know yet whether Texas law requires lawyers to be “belt and suspenders” lawyers, although the language of the Court about this “novel” theory fortunately suggests that is not the standard of care for lawyers practicing law in Texas.

Inasmuch as the Texas Supreme Court had not previously addressed whether judicial error could constitute superseding cause, the Court turned to established negligence principles and in particular, proximate-cause decisions for guidance.

The Court noted that for a breach of duty to proximately cause an injury, the breach must be a cause infact of the harm, and the injury must be foreseeable. Cause-in-fact requires proof of two elements: (1) the negligent act or omission was a substantial factor in bringing about the harm at issue, and (2) absent the negligent act or omission (‘but for’ the act or omission), the harm would not have occurred.”The Court pointed out that a negligent act or omission that “merely creates” the condition that makes the harm possible,” is not a substantial factor in causing the harm as a matter of law.

The Court noted that a superseding, cause may intervene between the original wrong and the final injury such that the injury is attributed to the new cause rather than the first and more remote cause,” Dew v. Crown Derrick Erectors, Inc., 208 S.W.3d 448, 450 (Tex.2006). A new and independent cause thus destroys any causal connection between the defendant’s alleged negligence, and the plaintiff’s harm, precluding the plaintiff from establishing the defendant’s negligence as a proximate cause. See Columbia Rio Grande Healthcare, L.P. v. Hawley, 284 S.W.3d 851, 856 (Tex.2009) (explaining how a new and independent cause “destroys the causal connection, if any, between the act or omission inquired about and the occurrence in question”); Dew, 208 S.W.3d at 450.

The Court also pointed out that in contrast to a superseding cause, a concurring cause “concurs with the continuing and co-operating original negligence in working the injury,” leaving the causal connection between the defendant’s negligence and the plaintiff’s harm intact. See Gulf, C. & S.F. Ry. Co. v. Ballew, 66 S.W.2d 659, 661 (Tex.Comm’n App.1933, holding approved).

According to the Court, the critical questions that distinguish between a superseding cause and a concurring cause are: “… was there an unbroken connection? Would the facts constitute a continuous succession of events so linked together as to make a natural whole, or was there some new and independent cause intervening between the wrong and the injury?”The Court pointed out that if “nothing short of prophetic ken could have anticipated the happening of the combination of events” then the harm is not reasonable foreseeable and is a superseding cause.

In determining if the judicial error was a superseding cause, the Court noted that the question is: not whether judicial error is generally foreseeable, but whether the trial court’s error is a reasonably foreseeable result of the attorney’s negligence in light of all existing circumstances.A judicial error is a reasonably foreseeable result of an attorney’s negligence if “an unbroken connection” exists between the attorney’s negligence and the judicial error, such as when the attorney’s negligence directly contributed to and cooperated with the judicial error, rendering the error part of “a continuous succession of events” that foreseeably resulted in the harm. Citing Bigham, 38 S.W. at 164.

If the lawyers conduct, merely furnished a condition that allowed a judicial error to occur then it does not establish the ensuing harm was a reasonably foreseeable result of the defendant’s negligence. If an attorney does not contribute to the judicial error itself and the judicial error is not otherwise reasonably foreseeable in the particular circumstances of the case, the error is a new and independent cause of the plaintiff’s injury if it “alters the natural sequence of events” and “produces results that would not otherwise have occurred.” See Hawley, 284 S.W.3d at 857.

In Neubaum, the Court noted that at the time the lawyers made the strategic decisions that were challenged in the malpractice case, the record showed the lawyers were neither negligent nor incorrect in arguing there was no evidence of agency.The trial court erred in allowing the agency issue to go to the jury.Accordingly, the lawyers in their motion for summary judgment in the malpractice case had presented evidence that the judicial error was not reasonably foreseeable because they did not contribute to the error.The Supreme Court also pointed out that the appellate court’s reversal of the adverse judgment conclusively established that taking all the lawyers’ negligent and non-negligent acts omissions, and strategic decisions together no adverse judgment would have occurred if judicial error had not intervened.The lawyers’ negligence may have created a condition that allowed the client’s injury of having a judgment entered against them to occur, but the lawyers’ negligence did not actively contribute in any way to the injuries involved in the suit.

The Court found as a matter of law the trial court’s error of law on the agency issue was a superseding cause of the usury judgment and the ensuing appellate litigation costs. The Supreme Court also found that the trial court’s legal error constituted a superseding cause as a matter of law, and therefore no expert testimony was necessary for the lawyers to negate causation.

Courts in California, Utah and Illinois appear to follow the same position as Texas.See Kasem v. Dion–Kindem, 230 Cal.App.4th 1395, 179 Cal.Rptr.3d 711, 716 (2014) (recognizing that “[j]udicial error by the underlying trial court can negate the elements of a legal malpractice claim”); Crestwood Cove Apartments Bus. Tr. v. Turner, 164 P.3d 1247, 1255 (Utah 2007) (agreeing “that a plaintiff cannot establish a claim for legal malpractice where judicial error was the proximate cause of the adverse result”); Huang v. Brenson, 379 Ill.Dec. 891, 7 N.E.3d 729, 737–38 (Ill.App.Ct.2014) (concluding judicial error acted as a superseding cause, rather than a concurring proximate cause, when there were no allegations the attorney contributed to the error, the attorney preserved the error, and the attorney was “vindicated on appeal”).

How far the Courts will take the judicial error defense is hard to tell at this time.Often the issue of causation is a relatively fact driven evaluation.The decision in Neubaum suggests that if there is one legal defense that the client could prevail upon and the lawyer’s conduct did not fall below the standard of care on that defense then the judicial error defense may work. An open question is how will a court in a malpractice case look at the judicial error defense if the client has not appealed the underlying action? Will expert testimony be required in order to try to evaluate the likelihood of success on appeal? There undoubtedly will be some questions whether the lawyers’ conduct influenced the result on all of the defenses. In those in sentence the judicial error defense may not work.There will probably also be cases in which the defense if it is successful will only work on part of the case leaving the lawyer still exposed on other claims.For now, we will have to wait to see how the judicial error defense develops over time.

Over the thirty years or so that I have represented lawyers, I have heard on many occasions that the trial judge made a mistake of law, and it was the judge’s error that caused the harm which forms the basis of the former client’s lawsuit against them.Texas, like many states has remained quiet on this point, until recently.Fortunately, for the lawyers in Texas there is now more hope that we can potentially argue in some situations, that the court’s legal error was what caused the client’s injury.

In Stanfield v. Neubaum,___S.W.3d___(Tex. 2016), the Texas Supreme Court took up the issue of whether judicial error could constitute a superseding cause that broke any causal connection between the lawyers alleged negligence and the injury to the client.Typically in these cases the lawyer is being sued for the appellate costs incurred by the clients second set of lawyers who handled the appeal and set aside the trial court’s complained of ruling. In Neubaum, the Texas Supreme Court found judicial error by the trial court could constitute superseding cause which could break the causal connection for a legal malpractice action when the judicial error was not reasonably foreseeable under all of the circumstances, and the negligence of the attorneys, if any, is unrelated to the judicial error.

In Neubaum, in the underlying case, the lawyers were defending a claim of usury against the client.The lawyers filed a motion for summary judgment asserting that a usury cure letter was a bar to liability to the claim for usurious lending.The trial court denied the motion.At trial the lawyers did not put on evidence to support the usury cure defense, but instead as a strategy, opted to defend on the basis that an alleged agent who created the usurious charge was not the agent of the client.During trial, at the charge conference the lawyers objected to an actual or apparent agency submission arguing that there was no evidence to support an agency claim.The trial court overruled the objection and included an agency question in the jury charge.The jury found against the client for almost $4 million in damages and penalties.The agency issue was challenged in a motion for new trial filed by the lawyers, which motion was denied.New counsel for the client then pursued an appeal, and on appeal, after spending $140,000 in fees, the court of appeals set aside the judgment against the client on the basis that the agency issue should not have been put before the jury.

Despite the win on appeal with new counsel, the client turned around and sued the original lawyers for malpractice.In the malpractice case, the client sued the lawyers to recover the appellate counsel’s attorneys’ fees incurred during the appeal.The client’s theory was that the lawyers in the trial court should have pursued not only the agency defense during the trial, but also the usury cure defense.This approach to the practice of law is often referred to as a “belt and suspenders” approach. That is, if you have two defenses, you need to support two defenses on behalf of the client, even if the client should prevail on either defense.

In the malpractice case, the lawyers moved for a traditional motion for summary judgment on proximate cause and argued that the error of the trial court in allowing the agency issue to go to the jury was the superseding cause which broke the causal connection between any actions of the lawyers and the client’s injury. Because the lawyers had only moved on causation, the Supreme Court declined to address directly the issue of whether the lawyers had a duty to put on evidence of both defenses.Thus, we do not directly know yet whether Texas law requires lawyers to be “belt and suspenders” lawyers, although the language of the Court about this “novel” theory fortunately suggests that is not the standard of care for lawyers practicing law in Texas.

Inasmuch as the Texas Supreme Court had not previously addressed whether judicial error could constitute superseding cause, the Court turned to established negligence principles and in particular, proximate-cause decisions for guidance.

The Court noted that for a breach of duty to proximately cause an injury, the breach must be a cause infact of the harm, and the injury must be foreseeable. Cause-in-fact requires proof of two elements: (1) the negligent act or omission was a substantial factor in bringing about the harm at issue, and (2) absent the negligent act or omission (‘but for’ the act or omission), the harm would not have occurred.”The Court pointed out that a negligent act or omission that “merely creates” the condition that makes the harm possible,” is not a substantial factor in causing the harm as a matter of law.

The Court noted that a superseding, cause may intervene between the original wrong and the final injury such that the injury is attributed to the new cause rather than the first and more remote cause,” Dew v. Crown Derrick Erectors, Inc., 208 S.W.3d 448, 450 (Tex.2006). A new and independent cause thus destroys any causal connection between the defendant’s alleged negligence, and the plaintiff’s harm, precluding the plaintiff from establishing the defendant’s negligence as a proximate cause. SeeColumbia Rio Grande Healthcare, L.P. v. Hawley, 284 S.W.3d 851, 856 (Tex.2009) (explaining how a new and independent cause “destroys the causal connection, if any, between the act or omission inquired about and the occurrence in question”); Dew, 208 S.W.3d at 450.

The Court also pointed out that in contrast to a superseding cause, a concurring cause “concurs with the continuing and co-operating original negligence in working the injury,” leaving the causal connection between the defendant’s negligence and the plaintiff’s harm intact. SeeGulf, C. & S.F. Ry. Co. v. Ballew, 66 S.W.2d 659, 661 (Tex.Comm’n App.1933, holding approved).

According to the Court, the critical questions that distinguish between a superseding cause and a concurring cause are: “… was there an unbroken connection? Would the facts constitute a continuous succession of events so linked together as to make a natural whole, or was there some new and independent cause intervening between the wrong and the injury?”The Court pointed out that if “nothing short of prophetic ken could have anticipated the happening of the combination of events” then the harm is not reasonable foreseeable and is a superseding cause.

In determining if the judicial error was a superseding cause, the Court noted that the question is: not whether judicial error is generally foreseeable, but whether the trial court’s error is a reasonably foreseeable result of the attorney’s negligence in light of all existing circumstances.A judicial error is a reasonably foreseeable result of an attorney’s negligence if “an unbroken connection” exists between the attorney’s negligence and the judicial error, such as when the attorney’s negligence directly contributed to and cooperated with the judicial error, rendering the error part of “a continuous succession of events” that foreseeably resulted in the harm. CitingBigham, 38 S.W. at 164.

If the lawyers conduct, merely furnished a condition that allowed a judicial error to occur then it does not establish the ensuing harm was a reasonably foreseeable result of the defendant’s negligence. If an attorney does not contribute to the judicial error itself and the judicial error is not otherwise reasonably foreseeable in the particular circumstances of the case, the error is a new and independent cause of the plaintiff’s injury if it “alters the natural sequence of events” and “produces results that would not otherwise have occurred.” See Hawley, 284 S.W.3d at 857.

In Neubaum, the Court noted that at the time the lawyers made the strategic decisions that were challenged in the malpractice case, the record showed the lawyers were neither negligent nor incorrect in arguing there was no evidence of agency.The trial court erred in allowing the agency issue to go to the jury.Accordingly, the lawyers in their motion for summary judgment in the malpractice case had presented evidence that the judicial error was not reasonably foreseeable because they did not contribute to the error.The Supreme Court also pointed out that the appellate court’s reversal of the adverse judgment conclusively established that taking all the lawyers’ negligent and non-negligent acts omissions, and strategic decisions together no adverse judgment would have occurred if judicial error had not intervened.The lawyers’ negligence may have created a condition that allowed the client’s injury of having a judgment entered against them to occur, but the lawyers’ negligence did not actively contribute in any way to the injuries involved in the suit.

The Court found as a matter of law the trial court’s error of law on the agency issue was a superseding cause of the usury judgment and the ensuing appellate litigation costs. The Supreme Court also found that the trial court’s legal error constituted a superseding cause as a matter of law, and therefore no expert testimony was necessary for the lawyers to negate causation.

Courts in California, Utah and Illinois appear to follow the same position as Texas.See Kasem v. Dion–Kindem, 230 Cal.App.4th 1395, 179 Cal.Rptr.3d 711, 716 (2014) (recognizing that “[j]udicial error by the underlying trial court can negate the elements of a legal malpractice claim”); Crestwood Cove Apartments Bus. Tr. v. Turner, 164 P.3d 1247, 1255 (Utah 2007) (agreeing “that a plaintiff cannot establish a claim for legal malpractice where judicial error was the proximate cause of the adverse result”); Huang v. Brenson, 379 Ill.Dec. 891, 7 N.E.3d 729, 737–38 (Ill.App.Ct.2014) (concluding judicial error acted as a superseding cause, rather than a concurring proximate cause, when there were no allegations the attorney contributed to the error, the attorney preserved the error, and the attorney was “vindicated on appeal”).

How far the Courts will take the judicial error defense is hard to tell at this time.Often the issue of causation is a relatively fact driven evaluation.The decision in Neubaum suggests that if there is one legal defense that the client could prevail upon and the lawyer’s conduct did not fall below the standard of care on that defense then the judicial error defense may work. An open question is how will a court in a malpractice case look at the judicial error defense if the client has not appealed the underlying action? Will expert testimony be required in order to try to evaluate the likelihood of success on appeal? There undoubtedly will be some questions whether the lawyers’ conduct influenced the result on all of the defenses. In those in sentence the judicial error defense may not work.There will probably also be cases in which the defense if it is successful will only work on part of the case leaving the lawyer still exposed on other claims.For now, we will have to wait to see how the judicial error defense develops over time.