Insurance Edition — Reducing Malpractice Exposure & Canadian Counsel Choices

Legal Malpractice—Reducing Your Law Firm’s Exposure” —

  • “Richard M. Zielinski, director at Goulston & Storrs, offers tips on how law firms can reduce their malpractice exposure… Over the years, legal malpractice claims have significantly evolved and changed—and the risks to your firm have increased correspondingly. We’ve seen changes in the nature of claimants and the quality of plaintiffs’ lawyers bringing these claims, changes in the types of claims being asserted, and changes in the way cases are litigated and defended. The following are tips for reducing your firm’s risk.”
  • “Nearly every state now has a mini-FTC consumer protection statute that broadly prohibits “unfair or deceptive” trade practices. Those statutes are very attractive to plaintiffs’ lawyers…. These statutes often come into play when something has gone wrong in the representation—the lawyer missed a patent filing deadline or failed to record a mortgage—and the lawyer attempts to “fix” the problem without promptly informing the client. Then, when the “fix” proves ineffective, the client sues and alleges that the lawyer didn’t simply make a mistake, but also deceived the client.”
  • “To the fullest extent possible, try to foster a culture in which lawyers reach out for advice from the firm’s general counsel sooner rather than later if they think they may have made a mistake.”
  • “Large law firms are increasingly writing mandatory arbitration clauses into their standard engagement letters… One caveat: when you draft an arbitration clause, make sure to include a warning that the client is giving up the right to have disputes heard by a judge and jury. You should also encourage the client to seek independent counsel before agreeing to submit any disputes to arbitration. That will foreclose any claim that the client did not give informed consent. Be sure to check the law in your jurisdiction for any additional requirements that may apply.”
  • “When a lateral lawyer brings a book of business to a new firm, the firm may find itself doing work for clients it would not have accepted in the first place, and those clients may embroil the new firm in malpractice actions arising from work that started at the old firm and carried over.”
  • “Lateral partners also sometimes get into trouble because they fail to follow the new firm’s procedures, for example, clearing conflicts, checking new client quality, or getting the firm’s sign-off on engagement letters.”
  • “Emails are permanent and almost always must be produced. Your lawyers need to be reminded constantly that email and text messages are no place to ventilate emotions or talk about how difficult or stupid their clients—or colleague—are.”

Court Permits Insurer To Appoint Counsel At Insurer’s Expense: Temple Insurance Company v Sazwan, 2018 ABQB 156” –

  • “In 2018, the Alberta Court of Queen’s Bench (Court) handed down a decision that provided a precedent for an insured to choose its preferred counsel that the insurers will have the onus of financing. This is permitted in certain circumstances only, and requires a reasonable apprehension of conflict of interest.”
  • “The Courts directed that the Sazwans could appoint counsel of their choice at the expense of the Insurers. The Court held that under the circumstances of the case, there was a reasonable apprehension of conflict of interest between the Insurers request to take over the defence. The Court found this for three reasons:
    1. The conduct of Sazwans was squarely an issue in the Underlying Actions, and an issue in terms of what claims were entitled to indemnify under the policy.
    2. The advancing claims were grossly in excess of the policy limits, therefore leaving the Sazwans exposed personally to enormous claims.
    3. The relationship between the Insurers and Sazwans was strained and could lead to more conflict in the future, which was not in the best interest of the Insurers, the Sazwans or administration of justice.”
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