Law firms face myriad risks whether from clients, vendors or their own attorneys. To make matters worse, law firms have recently seen an increase in the severity of legal malpractice claims made by clients causing a rise in defense costs and insurance premiums. Take a recent case against Chicago-based Winston & Strawn for example. In July, Law.com reported the law firm’s former client, a well-known hotel in New York, sued Winston & Strawn for $150 million, alleging the firm’s actions triggered a default on one of their hotel properties.

Lawsuits as large as the one facing Winston & Strawn are becoming a more viable concern among legal professionals. In May, The American Lawyer reported on a survey of 11 insurance companies that write lawyers’ professional liability coverage by Ames & Gough. The survey showed that “While the frequency of claims against law firms in 2021 was relatively flat, ‘the last several years have been the worst on record’ in terms of malpractice costs.” To limit the threat of a malpractice suit as well as the increased cost associated with defending against one, law firms should consider the following defense strategies:

• Accuracy: Nearly half of malpractice claims stem from substantive errors according to the American Bar Associations (ABA.) Substantive errors such as discovery mistakes, misapplying the law or missing a deadline, can be avoided by implementing more thorough processes. For example, it should be required that all documents be reviewed several times by multiple people to an established set of standards before they are considered final. There should also be enough time allowed to avoid missing mistakes due to fatigue. It is important to note a proven set of procedures can help lower insurance rates as it proves the firm is taking risk mitigation steps.
• Screening: Before hiring an attorney, client or vendor, law firms should complete a thorough screening process. In terms of malpractice, an off-putting situation that an attorney encounters with a potential client could warn them of a troublesome situation down the line. Law firms should work as a team to establish a cohesive process complete with questions, thoughtful conversations and more. This screening process is another risk mitigation tactic that can help lower insurance rates.
• Insurance: When malpractice claims do happen, firms should be equipped with errors & omissions insurance coverage or lawyers professional liability insurance (LPLI) to financially protect themselves against alleged or actual wrongful acts, errors, omissions, misstatements or misleading statements. LPLI polices typically include a per claim limit that can be anywhere from $100K to $10M and higher. Law firms should consult an agent or broker who specializes in insurance for lawyers to assess which limit would be most effective and ensure their portfolio is up to par.
  

As malpractice claims and the cost of such claims put pressure on law firms, attorneys must be able to practice law without the looming fear of multi-million dollar lawsuits hanging over their heads. Now more than ever, law firms need to reevaluate their procedures, tighten up their operations and ensure their businesses to continue properly serving their clients.