EDP Insurance Coverage protects law firms

What is EDP insurance coverage?

So many law firms are computer-dependent, and EDP insurance coverage is a necessity. Rather than insuring the computers as pieces of office or manufacturing equipment, the Electronic Data Processing (EDP) form responds to the need to protect hardware, software, media, and other exposures unique to this equipment. Coverage is available for hacking (unauthorized computer system access), virus damage, power shortages, overload, and outages.

There isn’t a standard form for providing Electronic Data Processing or Computer coverage. Because many insurers offer so many different forms, businesses seeking coverage must take extra care to understand what is covered.

Any commercial operation that owns and/or uses computers and other data processing equipment is eligible for EDP insurance coverage. Commonly a policy covers hardware, media, programs/applications, data records, proprietary programs, loss of income, and (on- or off-site) Website servers.

How the EDP insurance coverage applies depends upon the policy definitions of key terms, including “computer hacking,” “computer virus,” “data records,” “media,” “telecommunications equipment,” and others. EDP policies have many defined terms because technology is dynamic. Liberal use of specific policy language helps to preserve an EDP policy’s intended coverage.

Typically, coverage is provided against a specific list of events that can cause a tangible loss to electronic equipment. Different coverage applies to major areas of EDP, such as hardware, software, and Website servers. Covered businesses usually must comply with certain provisions to qualify for coverage, such as properly creating and storing backup programs.

There are certain types of property that, generally, are ineligible for coverage under an EDP policy, such as:

  • Hardcopy accounts, bills, evidence of debt, records, abstracts, deeds, manuscripts, program documentation, and similar property
  • Portable computers that are stolen or that disappear.
  • Any property used for illegal transportation or that is contraband.
  • Any property that is leased or rented to others
  • Currency, food stamps, lottery tickets, money, notes, and securities
  • Property held for sale.

One area that a business must pay attention to is how losses are settled. Are claims handled according to the lost equipment’s current value (Actual Cash Value – ACV) or according to what is necessary to replace the property? Settlement based on ACV can be a problem for companies that don’t regularly upgrade their EDP equipment. Technology changes so fast that payment for equipment purchased years ago is far less than needed to secure new equipment. On the other hand, replacement cost coverage would not be as critical for a firm that regularly changes equipment as damaged property would likely be newer.

Learn the basics of first aid for your firm.

Law Firm First Aid Basics

First aid is important emergency care administered by trained individuals for an injury or sudden illness before emergency medical treatment is available. All injuries should be treated since seemingly unimportant ones, i.e., splinters or puncture wounds can result in infection. Proper first aid can also help your law firm prevent large workers comp claims.

Follow these procedures before medical help arrives:

BLEEDING from lacerations, etc., is the most visible result of an injury. We have between 5-6 quarts of blood in our bodies. Most people can lose a small amount of blood, but if a quart or more is quickly lost, it could lead to shock and/or death. Treat bleeding by elevating the wound, using a clean cloth, and applying pressure with your hand until the bleeding stops. Never use a tourniquet (or similar device) to control blood flow except in response to an extreme emergency, such as a severed arm or leg.

UNCONSCIOUSNESS – Determine responsiveness by gently tapping the victim and asking, “Are you ok?” If no response and the victim is not breathing or has no pulse, begin CPR, and seek medical aid.

SHOCK – If not treated quickly, shock can threaten the life of a victim. Shock occurs when the body’s important functions are threatened by not getting enough blood or when major organs and tissues don’t receive enough oxygen. Symptoms include pale or bluish skin color, cold to the touch, vomiting, dull and sunken eyes, and unusual thirst. Shock requires medical treatment to be reversed. Prevent the loss of body heat by covering the victim with blankets.

Before administering the Heimlich maneuver, CHOKING first asks the victim to cough, speak, or breathe. If the victim can do none of these, stand behind the victim, locate the bottom rib with your hand, move your hand across the abdomen, make a fist and place the side of your thumb on the stomach. Position your other hand over your fist and press into the victim’s stomach with a quick upward thrust until the food or object is dislodged.

BURNS – There are many different types of burns, such as thermal, chemical, electrical, or contact burns. Each of these can occur differently, but treatment for them is very similar. First, run cold water over the burn for a minimum of 30 minutes. Flushing the burn takes priority over calling for help. If clothing is stuck to the burn, don’t try to remove it. Instead, cut or tear the clothing from the burn area. Cover with a clean, cotton material or leave uncovered if none is available. Do not scrub or apply any soap, ointment, or home remedies.

HEAT EXHAUSTION AND STROKE  — Heat exhaustion and heat stroke are two different things, although they are commonly confused as the same condition. Heat exhaustion occurs due to loss of body fluids and salts where there is poor air circulation. The body reacts by increasing heart rate and blood circulation. Symptoms include fatigue, dizziness, and disorientation, normal skin temperature but a damp and clammy feeling. Treat by moving the victim to a cool spot and encourage the drinking of cool water and rest. Heatstroke occurs when the body’s sweat glands have shut down. Symptoms include confusion, collapse, unconsciousness, and fever with dry, mottled skin. Immediately move the victim to a cool place and pour cool water over the victim.

HYPOTHERMIA can be life-threatening. Symptoms include: lower than normal body temperature, shivering, apathy, disorientation, drowsiness, and eventually unconsciousness. Immediately move the victim into a nearby shelter, remove wet clothes, and replace them with dry clothes or blankets.

POISONING – Move the victim away from the poison, then provide treatment. If it’s in solid form, i.e., pills, remove it from the victim’s mouth using a clean cloth wrapped around your finger. If it’s gas, use a respirator to protect yourself, then move them to fresh air. If it is corrosive, remove the clothing and flush it with water for 30 minutes. Have the container or label with you when calling for medical help.

FIRST-AID SUPPLIES should reflect the kinds of injuries that may occur and must be stored in an area where they are easily accessible. An automated external defibrillator (AED) should be considered when selecting first-aid supplies and equipment.

GOOD SAMARITAN LAWS – Most states have enacted Good Samaritan Laws to encourage people to help others in emergencies. These laws give legal protection to people who provide emergency care to ill or injured persons.

Insurance defense costs impact claim payouts.

Insurance Defense Costs

It’s important to understand how the defense costs work on your insurance policy because it can dramatically impact how claims are paid.

Did you know that a liability policy, part of any typical business insurance policy or commercial insurance coverage, has two distinct obligations? If it is general liability, product liability, or professional liability insurance policy, a liability insurance policy is designed to protect you against your legal obligation to pay others because you have hurt them and/or have damaged their property.

The policy also defends you against claims or lawsuits. In addition to paying claims, the policies will also pay for the associated defense costs and court fees until proven you are not negligent or the applicable policy is not responsible.

What Is Covered Under an Insurance Policy Defense Costs?

Defense costs generally include:

  • Attorney fees (including the cost of legal staff and expenses)
  • Court costs of the applicable jurisdiction
  • Costs of filing necessary legal papers
  • If applicable, the costs of expert witnesses.
  • Costs associated with investigation, etc.

How Are Defense Costs Handled?

Defense Coverage can be offered in two ways. It can be provided as part of the insurance policy’s liability limit or as a separate coverage.  You must read your policy carefully because the method has a huge impact on your insurance protection. Let’s say that Policy A and Policy B both provide liability insurance limits of $1,000,000;

Policy A provides defense coverage within the insurance limits

Policy B provides defense coverage outside of the insurance limits

Now let’s see what can happen:

Example: a client sues ABC law firm. The client slipped on a wet floor inside the office, sustaining back and wrist injuries.  The damages (medical and rehab costs) totaled $850,000, and the defense costs were $400,000. Here’s how each policy would handle the costs:

Expense Policy A Policy B
Defense Cost $400,000 $400,000
Damages $850,000 $850,000
Total Damages $1,250,000 $1,250,000
Total Paid $1,000,000 $1,250,000
  Client Obligation   $250,000  $0

If ABC Law Firms’ protection worked like Policy A, ABC would be responsible for paying the remainder of the damages because the defense costs worked towards exhausting their $1,000,000 insurance limit. Policy B’s method of providing coverage outside of the insurance limit offers the most protection. If you’re not sure how your policy handles your legal defense’s cost, you can give our office a call to find out more.

Do law firms need workers compensation

Common Workers Compensation Questions for Law Firms

If you are looking to start a new law firm, you might have some workers compensation questions. Is it needed? How does the audit work? How can I minimize premiums?  Below we have put together a summary of the top worker’s compensation questions and a brief answer to each.

Do I have to carry workers’ compensation insurance if I don’t have employees?

If you have a one-person company, you may be operating in a state that does not require that you maintain workers’ compensation coverage. However, contracts, licensing boards, or other regulations may require that you carry workers’ compensation insurance. Why? In many states, unless a company can show that subcontractors carry their own workers’ compensation insurance, subcontractors will be automatically covered under the hiring company’s policy, at the hiring company’s expense.

Do I still need workers’ comp insurance if I use contractors instead of employees?

Contract employees, leased employees, and some other work-for-hire situations may be exempt from workers’ compensation requirements, but some state laws require companies to cover 1099 contractors. When you hire independent contractors to do work for you, you should require that they carry their own workers’ compensation or assume that you will have to pay an additional premium to cover the subcontractor on your own policy.

Do I have to pay for workers’ comp coverage for myself?

In some states, owners, officers, partners, and other company principals can exclude themselves from their own companies’ workers’ compensation coverage. If you’ve got good health insurance and disability insurance policies, consider your risk low, and want to save on premiums, this may be a good choice for you.

What if I want to cancel my workers’ comp policy?

In virtually every state, the insurance company can charge and retain a minimum premium when a workers’ compensation policy is canceled. So, if you buy a workers’ compensation policy and cancel it two months later, you will still owe the minimum premium, which can be much more than the cost of two months of coverage. In some states, the minimum premium can run from several hundred dollars to more than $1,000. So, read the fine print before you decide to cancel your workers’ compensation policy, and be sure it will actually save you money.

What’s a premium audit?

Your workers’ compensation premium depends on the number of people you employ and what risk classifications those employees fall into, based on each person’s scope of employment. Your carrier will conduct an annual premium audit to determine these numbers and set your company’s workers’ compensation insurance premium for the policy period accordingly. It is important to note that during the audit period, the carrier may adjust the premiums and findings from the current period and make that adjustment retroactive to cover the employees and risk classifications incurred during your previous policy period.

What can I do to minimize my premium?

Audit mistakes can cause you to lose coverage or unnecessarily inflate your company’s workers’ compensation insurance premium, so it’s important to prepare. Designate a knowledgeable contact person for the auditor who is familiar with your employees’ work. Be sure to provide accurate and detailed information because, without it, the auditor may assume the worst-case scenario for risk exposure and increase your premium. Review your payroll documents to ensure that they will allow the auditor to readily break out overtime pay and discount it back to straight time, as is allowed in most (but not all) states’ workers’ compensation rules. Your payroll records should also reflect each employee’s actual hours in each of the different workplace exposure categories. Otherwise, all of the employee’s payroll will go into the most expensive classification applicable. If your company uses 1099 subcontractors, show the certificates of insurance documenting that they have their own workers’ compensation insurance.

What if I have employees in multiple states?

It is essential to break down your payroll by state. If you do not provide the insurance company with accurate information about payroll you have in each state where work is done, the insurance company will likely not pay claims that occur in unreported states, even if the total payroll on your report is accurate. Be sure the person handling the audit in your office is aware of and has access to accurate information on out-of-state payroll and that the audit is fully completed.

Do independent contractors need workers compensation insurance?

Employee or Independent Contractor

There are times when a law firm needs to hire an independent contractor. So how do you know if they should be covered on your workers compensation insurance policy? Under the Workers’ Compensation Law, most individuals providing services to a for-profit business will be deemed employees of that business. The employer must cover them for workers’ compensation insurance. This applies unless those services are specifically excluded as employment under the WCL.

For workers’ compensation insurance purposes, the term employee generally includes day labor, leased employees, borrowed employees, part-time employees, unpaid volunteers (including family members), and most subcontractors.

Many factors are used to decide whether an individual is an employee under the Workers’ Compensation Law. If a business meets any of the criteria listed below, and the individual hired does not meet the criteria listed under independent contractors or the services rendered are not specifically exempted as employment under the WCL, then that business must obtain a workers’ compensation insurance policy.

The factors that are considered to determine whether an individual is an employee within the meaning of the WCL and thus must be provided with workers’ compensation insurance coverage by the employer include:

Right to Control– The degree of direction and control a person or organization exercises over someone they contract with to perform a task is always a central issue in determining an employer-employee relationship. A person or organization controlling how the work is to be performed indicates that an employee performs the task. If the person doing the labor controls the time and manner in which the work is to be done, this may indicate that an independent contractor is doing the task. If an individual is truly independent, the individual generally works under his/her own operating permit, contract, or authority.

The character of Work Is the Same as Employer– Work being done that is consistent with the hiring business’s primary work indicates that an employee is doing the labor. Work done by a person different from the primary work of the hiring business may indicate an independent contractor is performing the task. (For example, someone installing shingles for a roofer is generally considered the employee of that roofer. Conversely, a plumber hired on a one-time basis to fix a broken pipe for a retail store owner is generally considered an independent contractor)

Method of Payment– Employees tend to be paid wages on an hourly, daily. Weekly or monthly basis. Naturally, employment is indicated if the hiring business withholds taxes and/or provides other employee benefits (Unemployment Insurance, health insurance, pensions, FICA, etc.) Whether the labor is paid using a W2 or 1099 Form for tax purposes does not matter determining an employer/employee relationship for workers’ compensation purposes. A business paying cash to an individual for services usually indicates that the individual is an employee. Payment made for the performance of the task as a whole may indicate an independent contractor is doing the task.

Furnishing Equipment/Materials– A business providing the equipment and/or materials used by people in performing the work indicates an employer-employee relationship.

Right to Hire/Fire– A business retaining the authority to hire and fire the individuals performing the work indicates an employee performs the work. An independent contractor retains a degree of control over the time when the work is to be accomplished and is not subject to be discharged by the hiring entity because of the method he chooses to perform the work. Naturally, an independent contractor’s services may be terminated if the services rendered do not meet contractual requirements)

All factors may be considered, and no one factor alone determines whether a person will be considered an employee under the WCL.

Protect your law firm from employee theft.
Employee Theft & Employee Dishonesty is something that every law firm should be aware of. Your employees’ things may negatively affect your revenue or cause losses due to theft of money, securities, or property. This workplace crime also includes burglary and destruction. Here are five things you can do to protect your business from potential theft.

Protecting your law firm from employee theft.

  1. Surveillance Systems – A surveillance system offers security for your business & security for your employees. Keep backup copies of your surveillance video footage to ensure that you are covered in case of theft, whether that is due to an employee or not – Another good idea is to store the footage offsite in case of a fire, flood, theft, or another disaster – How many people have the keys to your office space?
  2. Get Employee Dishonesty Insurance – (Also known as a Fidelity Bond) Protect your business from financial loss due to fraud committed by an employee or even a group of employees. People often ask what is covered by employee dishonesty insurance, and here are the basics:
    • Alteration or Forgery
    • Transfer Fraud
    • Computer Fraud
    • Credit Card Fraud
    • Money Order or Counterfeit Fraud
    • Stolen Goods/Property
    • Remote Access Fraud
  1. Track petty cash & items that are commonly stolen – Keeping track of your assets (big or small) is important, as is knowing where/how your petty cash is being spent. Let’s take a look at the top 8 most commonly stolen office items:
    • Pens, pencils, and highlighters. According to Boston.com, 82% of employees have admitted to stealing these items.
    • Paper products. Think of notebooks, sticky notes, and printing paper. 35% of employees admit these items randomly disappear from the office.
    • Paper or Binder Clips. Surveys show 28% of workers noticed these items getting pinched.
    • Staplers
    • Scissors
    • Printer Ink
    •  Binders
  1. Check The References – This is an easy and obvious solution to understanding your potential employee’s history & character. Ask specific questions, such as the person’s tardiness, social skills, or any issues with the employee. Other questions include: How did the employee handle conflict/stress? Would you rehire the employee? And Were they promoted during his employment?
  2. Reward System – Offer rewards for the employee who turn-in other employees who have stolen goods, cash, or other items. One thing to convey to employees is that stealing a pen, stamp, or a few paper clips shouldn’t be an issue (unless done on a large scale). Things such as giving items/food away for free (such as a family member or friend), stealing key products, or even using company items specifically for personal use fall under this reward system.

General Liability Supplemental Payments

Supplemental payments for insurance policies.

Most liability insurance policies have clauses dealing with supplemental payments: the standard business auto policy, personal auto policy, and general liability policy all contain supplemental payments sections.

The first provision in the supplemental payments clauses states that the insurer will pay the expenses it incurs. This seems reasonable since the insurer has the duty to defend the insured against covered liability claims and takes upon itself the right to settle any claim or lawsuit filed against the insured. This duty and right obviously involve expenses, and in exercising that duty and right, the insurer should be responsible for the payment of those expenses.

This “paying the expenses” provision is normal in liability policies, but the wording may cause some questions to arise. For example, the general liability policy states that the insurer will pay the expenses it incurs in any lawsuit it defends; the business auto policy does not clarify this point, simply stating that the insurer will pay the expenses “for the insured.”

What supplementary costs are covered?

This begs the question: what about the investigative expenses or the expenses paid in settling a claim before any lawsuit? Since the auto policies do not limit the extent of the insurer’s expenses, it can be presumed that any investigative or pre-lawsuit settlement expenses are covered.

The general liability policy does include investigative and settlement expenses in its preamble to the “paying the expenses” provision, while other policies are less clear on this fact.

Other supplemental payment provisions deal with bonds.

The general liability policy states that the insurer will pay up to $250 for the cost of bail bonds required because of an accident, while the business auto policy will pay up to $2,000. The policies will also pay the cost of bonds to release attachments wherein the bond is used to dissolve an attachment of property, that is, the legal act or process of acquiring a lien upon property for any judgment satisfaction. The insurer does not have to apply for or furnish the bail bonds or the release bonds.

Note that the various policies’ bond provisions do not mention the cost of premiums on appeal bonds required in any lawsuit defended by the insurer. This absence of a provision about appeal bonds begs the question: does the insurer have to appeal a decision against its insured? If there are reasonable grounds for an appeal, the insurer has the duty to pursue an appeal.

The supplementary payments provisions also offer to pay all reasonable expenses incurred by the insured if and when the insurer requests the insured to assist in the investigation or defense of the claim or lawsuit.  This includes actual loss of earnings by the insured up to $250 a day because of time off work.  Since the insured is required by the policy conditions to cooperate with the insurer in the investigation, settlement, or defense of any claim or lawsuit, it is very appropriate for the insurer to pay the insured’s reasonable expenses in such cooperation. This raises the question: What is a “reasonable expense”? And is $250 a day for time off work an acceptable sum?

Not all court costs are covered.

Court costs taxed against the insured are another item included in the supplementary payments. The current commercial general liability (CGL) form and the current business auto policy (BAP) note that these costs do not include attorneys’ fees or expenses taxed against the insured. This means that the attorneys’ fees and expenses of opposing counsel that may be taxed against the insured are not covered as supplementary payments. By excluding opposing attorneys’ fees and expenses as supplementary payments, these fees and expenses can be viewed as damages the insured is obligated to pay because of the bodily injury or property damage claims. The fees and expenses are then paid out of the policy limits of insurance.

Judgment liability

Interest on the full amount of any judgment against the insured that accrues after entry of the judgment is part of the supplementary payments section of all the liability policies. Normally, after a judgment is rendered against the insured, the court will allow interest to accrue on the amount due until the judgment is satisfied. Since the insurer may appeal the judgment, it only fits that the insurer also pays for any interest that accrues on the judgment amount while the appeal process proceeds. Note, however, that the policies do limit this interest payment in certain ways.

The CGL form also has this limitation on interest payments after the entry of any judgment. Still, it does offer a supplementary payment that the other liability policies do not address. The CGL form offers to pay prejudgment interest awarded against the insured. If the insurer makes an offer to pay the applicable limit of insurance, the insurer will not pay any prejudgment interest based on that period of time after the offer is made.

The final point to mention about supplementary payments (and the most rewarding from the insured’s standpoint) is that the payments do not reduce the limit of liability. The supplementary payments are in addition to the policy’s limits of liability.

As noted, the supplementary payments clauses are an integral part of the liability policy, and as part of the insurance contract, both insureds and insurers need to recognize their importance.

Avoiding Malpractice Claims through Time Management

Missed deadlines and time management-related errors are the second biggest cause of malpractice claims at all firms’ sizes.  Over the last decade, they have represented over 17 percent of all malpractice claims.

The most common time-related error is a failure to know or ascertain a deadline – missing a limitation period because you didn’t know it. The good news is that this specific error has declined by almost 50 percent over the last ten years. The bad news is that the other time and deadline-related errors are holding stable or increasing slightly.

While in the longer term, we expect that the new Limitations Act will result in fewer limitations period claims, at this stage, it does not appear to have had any impact. Indeed, it may have resulted in more claims over the last year due to confusion over transition provisions.

A calendar failure is the second most common time-related error (a limitation period was known, but it was not properly entered in a calendar or tickler system). The fourth most common time-related error is the failure to react to calendar error. In this case, the limitation period was known and entered into a tickler system but was missed due to a failure to use or respond to the tickler reminder.

Lawyers at firms of all sizes seem to have a dusty file or two that sits on the corner of their desks for far too long, and this makes procrastination-related errors the third most common time-related error. By count and costs, procrastination-related errors are on an upwards trend.

These deadline and time management errors are easily preventable with better time management skills and the proper use of tickler systems. Practice management software programs such as Amicus Attorney and Time Matters are excellent tools for helping lawyers manage deadlines and tasks and better manage client communications and relationships.

Settle and Sue Trend

A recent trend within the legal industry is the “settle and sue” lawsuit.   A plaintiff in this type of legal-malpractice action is unhappy with settling a prior lawsuit even after the plaintiff voluntarily agreed to settle the case. In classic buyer’s remorse mode, disgruntled clients regret deciding to settle and focus their litigation crosshairs on their former attorney who advised the “negligent” settlement.  In this case, the blame for that mistake is projected toward the former attorney.

An attorney may not be able to absolutely insulate himself or herself from a lawsuit raised by a former client post-settlement. Still, there are tips that one may follow to allow a more favorable opportunity to defend such a claim. Here are some suggestions:

Establish parameters early in the representation. Use an engagement letter to the client to underscore that your objectives are not necessarily to obtain the highest monetary settlement/verdict or to defend the case so that the least amount of money is paid. Rather, the goal of resolving the case is to reach a settlement that the client can understand and accept, given the strengths and weaknesses of the case. In short, don’t promise the moon. Merely promise that you will provide the best recommendations you can.

Get client input. Communicate with your client regularly regarding what his or her expectations of the case are and document his or her potentially evolving impression of the case in writing. Clients change their attitudes and goals frequently. Therefore, an attorney would be prudent to elicit regular input from his or her client to ensure that there is no miscommunication about what constitutes a “fair” settlement.

Fully explain the release. Clients frequently will assert that they could not understand the legalese of litigation and that no one attempted to explain the legal intricacies. Avoid that issue by showing your client a copy of a standard release early in the process and invite a discussion about the ramifications of signing such a release (for example, it may mean there is no admission of liability and one party is releasing all other potential claims). Again, document that this consultation took place.

Describe the mediation process in writing. If a case mediates, ensure that the client understands what the mediation process entails. This will require putting in writing (a) the qualifications and justification for the selection of the mediator, (b) the strengths and weaknesses of the case, (c) the possible settlement range and verdict range of the case, and (d) an acknowledgment that settlement could bypass a better result at trial. Reiterate that the parties are not obligated to settle just because a mediation has been scheduled and paid for by the parties. Rather, the client must be told in writing that they should ask questions if they do not understand any part of the process and should never feel forced to settle.

Alert the client to post-settlement responsibilities. The client must be aware of how any potential liens will affect the collectability of settlement, the time frame for payment, and how the attorney fees may be paid from that settlement. The case is not over the moment an agreement to settle is reached, and the client must be kept apprised of what will be done to bring a final resolution to the case.

A purchaser stricken with buyer’s remorse is consumed by the type of regret evidenced by plaintiffs in “settle and sue” lawsuits. Most jurisdictions agree that settlement of an underlying action does not automatically bar malpractice claims. Regardless of a plaintiff’s motive, the defendant-attorney must understand the law of his or her jurisdiction regarding these types of cases and must take comprehensive steps during the underlying litigation to ensure that there are ample grounds to defend the claim if one arises. The execution of a settlement agreement is usually the final chapter of litigation. At other times, it serves as a prologue for the “settle and sue” lawsuit.

Avoiding Bad Clients

Bad clients can make you question your skills, destroy your reputation, and result in the worst money you have ever made.  Learning how to spot and avoid them can be the best decision you ever make.

All Clients Are Created Equal, Right?


Bad clients have an amazing way of sapping time and energy in ways you cannot bill for.  Remember, you cannot bill for stress. You cannot bill for screaming when you get off the phone. You cannot bill for not sleeping well. You cannot bill for spending an hour talking about why you already wrote off a third of your time and why your bill is reasonable.

Bad Clients Chase Away Good Ones

Bad clients can cause you to turn down good clients for two reasons:

  1. Bad clients have an amazing way of sucking up more time than they should. That means you will probably turn down good clients because you are so busy dealing with your problem client.
  2. The mental fatigue is greater than you realize. When you are in the middle of dealing with a bad client, it can make otherwise good clients seem like bad clients.

It Doesn’t Get Better

You are doing yourself a disservice if you tell yourself, “it can only get better” or “it has to get better from here.” Sure, you can cross your fingers and hope they suddenly start responding to phone calls or emails, but that probably won’t be the case.  Hopefully, your retainer has a provision for these scenarios, and you should not be afraid to invoke it and terminate your representation.

Check the Warning Signs

Now that you understand all money is not created equal, you can sharpen your intake skills to avoid bad clients. Someone might call with what sounds like the greatest case in the world, but your intuition may make you question the case or the client.  Instead of talking yourself into cases, trust your instincts and turn them away.

If you are not ready to live and die by your gut, here are some other warning signs that trouble could be brewing down the road:

  • Your client calls with a  legal emergency but then doesn’t return your call for days.
  • Your client doesn’t know who you are because they have called so many different attorneys.
  • He leaves a message without any specific details, other than he knows “it’s a great case,” and you need to call back immediately.
  • She sends multiple emails with documents before ever talking to you.
  • Makes an appointment and then no-shows or reschedules repeatedly.
  • The client tries to bargain on your rate or explains why you are too expensive.
  • Explains they previously hired another attorney but want to give you a shot.
  • Tells one story over the phone and a completely different one in your office.

That is not an exhaustive list by any means. Those are just some of the red alerts that should warn you about potential issues looming.  This is also the perfect opportunity to bounce the case off another attorney and get some feedback. But never try and convince yourself that any client is a good client. It’s not that simple.