It seems like everyone wants to know which areas of practice are the “riskiest”. Fortunately, the ABA has been collecting data on lawyer malpractice claims for about 40 years, and we know the answer. The two areas consistently at the top of the chart are plaintiff personal injury representation and real estate transactional work. In previous risk management tips we’ve provided specific advice on how to lower your risk if you practice in these two areas.
But beyond these two perennial risk leaders, what’s trending these days? Here are the up and coming “uh oh, be careful, look out!” areas that should get your attention, especially if they are part of your practice:
Estates, Trusts and Probate
Bankruptcy & Collections
Trends indicate these areas of practice are getting riskier, and it’s happening fast. So, why the sudden uptick? Let’s look at some common sense reasons why malpractice claims are on the rise.
Estates, Trust and Probate
I’ve written extensively on this risky practice in the past and offered what is, hopefully, sound advice on how to stay on the safe side. But as to WHY insurance companies are starting to tighten underwriting guidelines, there’s a two-word answer: baby boomers. We are entering, over the next 20 years, an era of the greatest transfer of wealth ever. Trillions of dollars will flow from parents to heirs and your work falls smack in the middle of this often turbulent river. The sheer volume of this work is bound to produce claims. As I’ve pointed out before, this is not an area to cut your teeth on. “On the job training” for a new solo that sees this as an attractive area…well, that really raises the claim stakes from high to downright inevitable.
Bankruptcy and Collections
At first blush these would seem to be quite separate areas, and indeed they are, but statistics show us they are conjoined by overwhelming correlation. That means if you practice in one, you are likely to practice in the other area as well. The claims frequency increase is strongest in the commercial bankruptcy arena. Filings are up dramatically and the common sense analysis of “why” yields this tidbit: Follow the money. As in Estates, Trust and Probate, the claimant (the person or entity bringing the claim against you) is often not your original client. Commercial bankruptcies get administered by court appointed trustees who do not have a relationship with you and know little of the work you did for your client before a court assigned asset distribution. As is often the case, when the pot of money is empty, the only thing left to do is look for additional pots. You are in the crosshairs and a suit alleging negligent work is designed to force $ from you to refill that empty pot. Concurrent with these type of claims is the risk for debt collectors. That risk continues to increase as federal and state regulations get more and more restrictive. The practice of debt collection is quickly becoming a minefield, with more and more attorneys looking for regulatory transgressions to bring single action or class actions against collections attorneys.
Boomers are again the bugaboo in this risk pool, and the culprit is “failure to document”. When you represent one party in an asset distribution that will not take place for some time (usually it’s when retirement funds get distributed), it behooves you to plan against future “memory loss”. If you fail to adequately memorialize the agreement between parties, you leave the door open for claims when the opposing side is unhappy with distribution. Risk management here involves thoroughly documenting the advice you give and when you give it, especially if it is verbal. Memories are short, but paper trails can last for years! Have something concrete in your files to document your advice AND the agreement of the parties on future distributions.