“Legal Malpractice Claims Grow in Size as Clients Turn on Counsel” —

• “Law firms are being targeted with increasingly expensive lawsuits, as large insurance policies, client resistance to paying fees and the role of investors in litigation put legal operations on the defensive.”
• “Law firms are being hit with client suits that allege missteps such as conflicts of interest or failure to timely file a document. The clients bringing the suits are turning to attorneys who have developed specialties in suing law firms.”
• “‘There’s a greater willingness for clients to turn against their lawyers,’ said Bethany Kristovich, a litigation partner in the Los Angeles office of Munger, Tolles & Olson who defends Big Law firms against suits. Clients often see the firms ‘as simply as another pot of money,’ she said.”
• “Law firm insurance claims resulting in multimillion-dollar payouts increased year over year, insurance broker and consultant Ames & Gough said in a 2023 report. Of 10 companies that insure about 80% of Am Law 100 firms, seven paid a claim of more than $50 million in 2021 or 2022—and two paid a claim that topped $150 million, according to the report.”
• “Trusts and estates, followed by business and commercial transactions, are the leading practice areas for malpractice claims against law firms, Ames & Gough’s report found. The role of litigation finance in client suits—with investors paying the cost of a litigation while seeking a return—is boosting the risk of large payouts, the broker said.”
• “Law firms’ appearance of being backed by deep-pocketed insurers helps make them malpractice targets, said Leslie Corwin, managing partner of Eisner LLP, who represents law firms in malpractice cases.”
• “Market pressures and economic turmoil also make law firms more vulnerable to legal attacks, Corwin said. Clients are more likely to contest a big bill when business is tough, he said.”
• “TerraForm Power LLC sued Orrick, Herrington & Sutcliffe and Cleary Gottlieb Steen & Hamilton in 2021, claiming the company faced $300 million in payments because lawyers at the firms allowed the word ‘buyers’ instead of ‘buyer’ into a purchase agreement.”
• “Lawyers who once hesitated to bring legal actions against the industry that employs them are take cases today without fear of repercussions and reputational harm.”
• “Bill Reid, a lawyer on Musk’s team suing Wachtell, said attorneys used to fear bringing actions against law firms ‘in part based on the notion that they will soon become a pariah in the legal world and that other law firms won’t send them business.’ But Reid said that hasn’t been his experience since he took on the work that ‘no one else was willing to do’ two decades ago.”
• “Few of Reid’s cases end up on a public docket. He said he engages in a pre-suit process that allows firms’ and their insurance carriers to engage with a client. The discretion, he said, buys Reid good favor with insurance carriers and the law firms, which, he said, still send him referrals.”
• “Law firms will face more legal claims in the coming year alleging breaches of fiduciary duties and breach of conflicts, said Kristovich of Munger, Tolles & Olson. ‘The size of the claims continue to grow as lawyers and law firms handle bigger and bigger transactions and deals,’ she said.”

“UK: What’s Behind Large Losses in Law Firms?” —

• “Paul Smith, Senior Risk Management Consultant at Travelers Europe, studies data about losses in solicitor firms in an effort to identify such patterns which hopefully shines a spotlight on where risk management can help. Recently, he reviewed sets of solicitors’ data between October 2000 and September 2023 to gather a significant data set of large loss claims, which the insurers defined as being over £250,000. While that figure in 2001 would represent a much larger amount than it does in 2023, due to inflation, there are still some clear themes that emerged from the research.”
• “Large losses are persistent, becoming more costly, and happen for law firms of all sizes: Smith noted that there have been a high number of claims for large losses in recent years and the total severity of those claims has been trending up. While one might assume large firms are responsible for the largest losses, these claims tend to spread across all sizes of firm, not just the large or small firms.”
• “The top five areas driving large losses in law firms appear consistently over time: From 2001-2023, commercial work represented 30% of claims notifications and 50% of damages claimed. The remaining four areas included commercial litigation, commercial property, residential property, and trust & probate. However, commercial work remains a clear outlier in the severity and frequency of its risks to firms.”
• “There are patterns in the kinds of errors that lead to claims for large loss: Firstly, large loss cases tend to involve more failures of advice than in the overall book. Secondly, the most frequently notified errors pertain to retainer management failure. These errors are often very simple, such as not following instructions, taking the wrong step in a process, or missing a time limit. Finally, dishonesty has been on an upward trajectory since 2020 and involves a mix of methods, such as identity theft, fraudulent sellers, or the interception of payments and the changing of bank details.”
• “Mapping legal work areas onto errors reveals more specific risk management targets: Commercial work presents the main challenge for firms looking to reduce errors in retainer management, drafting and advice as all three areas are claim hotspots. Commercial property and commercial litigation generate claims in retainer management and advice. In residential conveyancing, claims involving dishonesty (whether the dishonesty is by an employee or a third party) are a hotspot where firms could focus their attention.raudulent sellers, or the interception of payments and the changing of bank details.”