Risk Update

Covid, Clients & Risk Management — Experts Weigh in on Shifting Landscape and Real Law Firm Malpractice Risks

Comprehensive overview of issues and recommendations from three lawyers at Munger Tolles: “Safeguards Against Legal Malpractice Liability As Claims Rise” —

  • “According to an annual survey by insurance broker Ames & Gough, the magnitude and number of legal malpractice claims in the U.S. had already increased significantly in 2019. Now with COVID-19 resulting in a severe economic slowdown and remote work conditions across the country, business interruption is on the rise, as are novel challenges for clients and lawyers alike.”
  • Remote Work. A shift to remote work has disrupted the day-to-day practices of firms across the country, and lawyers have been forced to change the way they communicate with clients and colleagues. These changes could result in inadvertent divulgence of confidential client information, inadequate communication with clients, missed deadlines or miscommunication among colleagues regarding assigned tasks and deadlines — all of which could lead to a malpractice claim.”
  • Tightening Client Budgets. Economic disruption often leads to shirking legal budgets. You may find clients pushing you to do more with less in terms of time spent on research or filings. This budget pressure may result in inadvertently missing legal issues or forgoing arguments that could have benefited the client in hindsight.”
  • Conflicts of Interest. Another danger of increased corporate restructuring is heightened difficulty determining whether legal representation would result in a conflict of interest. Conflicts of interest, either actual or perceived, are consistently the most commonly alleged error in malpractice claims. As companies change in shape and scope, it is not always easy to know whether one corporation may be adverse to another such that a conflict would result, which might lead to an increase in malpractice claims based on actual or perceived conflicts of interest.”
  • Expanding Client Base. The economic challenges of the pandemic may encourage lawyers and law firms to accept clients they might previously have declined. These clients may work in industries outside the scope of the lawyers’ general practice areas — and thus be more likely to encounter legal challenges unfamiliar to the lawyers — or may operate in more questionable ethical or legal territory than a lawyer’s long-standing client base.”
  • Be hyperaware of conflicts. Just because a conflict does not exist at the outset of representation does not mean that a conflict will not arise down the road, especially if the client undergoes corporate restructuring. Someone on the team should be in charge of monitoring for changes in clients’ ownership or corporate structure. Anytime there is a change, this person should map the new structure to identify any new entities — such as subsidiaries and parent companies. Circulating this information through the entire conflicts process will help flag conflicts that arise out of a complex corporate structure that may not be otherwise apparent.”
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