Risk Management for Law Firms

Unfortunately, there is no simple way to predict if your client will sue you for malpractice. In order to prepare for the likelihood of malpractice claims, it is necessary to actively engage in risk management. Risk management involves the use of a comprehensive risk management policy.

New Clients

Risk management begins as soon as a person becomes a potential client. Every lawyer approached by a potential client must first ascertain if they have the necessary expertise for the matter. An eager lawyer may be tempted to take on every client, expecting to learn the area of law. This is dangerous behavior in most cases.

Having identified the matter as one in which you have expertise, the attorney must then assess available resources. If the attorney’s calendar is full or if the matter will take too much time, it is best to not take on the client. By taking on the client when you are too busy, you would expose yourself to double the risk, from the client you are short-changing to take on the new matter and from the new client.

Check for Conflicts

Lawyers must have stringent conflict checks. This is not only a risk management consideration, but also a major factor in ethics rules. Conflicts checking involves not only knowing and applying ethics rules, but also setting up a formal system. Ideally, a computerized system should be used to maintain client and matter lists.  There are various off-the-shelf software programs that are appropriate for conflicts checks. While the expense may seem needless in the outset of your practice, in this area it is far better to be overly-cautious.

Engagement Letter

Once a person has passed the conflicts check and you are ready to take them on as a client, the engagement letter and/or fee agreement may also serve as a risk management tool. In addition to clearly setting out the terms of service, the agreement can potentially include fee arbitration and mediation clauses.

In addition, as clients are often emotional and full of expectations, a law firm should use both dis-engagement and non-engagement letters. It is very important that the client know and understand when you refuse or conclude service.

Insurance Policies

While every lawyer in the firm should read the policy and be familiar with its general provisions, one person should be tasked with maintaining it. This person should know the policy extremely well and he or she should handle all purchase decisions. This person should be the main point of contact with the insurance company. It might be advisable for this person to receive additional training in identifying risks and advising on a recommended course of action.