Lawyers Insurance Archives - Page 2 of 6 - Lawyers Insurance Alliance

Sewer Backup

One of the most overlooked but essential insurance coverage a law firm can purchase is sewer and drain backup coverage.

What is “Sewer Backup”?

Large rain storms and floods can cause extensive water damage, but they can also cause sewage lines to overfill and back up into your law firm through the drain pipe. These types of backups are not only difficult and expensive to repair, but they can also pose a health hazard to other employees and students.

This type of insurance claim is typically excluded from a standard insurance policy unless you purchase an endorsement adding the coverage.

Sewer Lateral?

Did you know that you (or possibly your landlord) are responsible for the maintenance and repair of the pipeline between the city’s sewer main and your building (the sewer lateral)? A cracked or deteriorated lateral can allow groundwater to seep into the system, contributing to the possible sewer backup problems.

Causes of Sewer Backup

Blockages due to Tree Roots: Shrubs and trees seeking moisture can make their way in to sewer line cracks causing extensive damage. They may start small, getting into a small crack in the pipe, but as the tree or shrub continues to grow, so does the root. Tree roots can enter the service pipe at joints and cause blockages.
Sanitary Main: A blockage can occur in a city sanitary main. If the blockage is not detected in time, sewage from the main can back up into your firm through floor drains. These types of leaks will typically happen slowly.

Water in Basement: Most basement flooding is unrelated to the sanitary sewer system, and it is typically a case of how the soil around the building has settled. If not fixed, this can drain rainwater into your firm instead of away from it.

Business Insurance Will Not Cover Flood Damage

Only flood insurance will cover your losses in the event of a flood. Federal flood insurance policies can be purchased directly from an insurance agent or a company representative and are available to communities participating in the National Flood Insurance Program.

Ways to Prevent Backups in Your Lateral and the City’s Main

Dispose of Grease Properly: Cooking oil should be poured into a heat-resistant container and disposed of properly after cooling off, not in the drain. Washing grease down the drain with hot water can cause significant problems. As the grease cools off, it will solidify either in the drain, the property owner’s line, or the main sewer causing the line to constrict and eventually clog.
Dispose of Paper Products Properly: Paper towels, disposable (and cloth) diapers, and feminine products can cause many problems in the property owner’s lateral and the city main because they do not deteriorate quickly, as bathroom tissue does.
Replace your line with a new plastic pipe: To prevent tree roots from entering your line, replace your line and tap with a new plastic pipe. If you still have problems with tree roots growing in your lateral, you may have to have roots cut periodically.

Install a Backwater Prevention Valve: A backwater valve is a fixture installed into a sewer line, and sometimes into a drain line, in the basement of your home or business to prevent sewer backflows. A properly installed and maintained backwater valve allows sewage to go out but not to come back in. Property owners are responsible for the installation and maintenance of backwater valves.

What to do if you Experience a Sewer Backup

A sewer backup can lead to disease, damage your valuables, damage your house or business, and even result in electrical malfunctions. Prompt cleanup of the affected property can help minimize the inconvenience and prevent mold and further damage. In the event of sewer backup, immediately arrange for the cleanup of your property. This should include:

Wet-vacuuming or removing spillage
Mopping floors and wiping walls with soap and disinfectant
Flushing out and disinfecting plumbing fixtures
Steam cleaning or removing wet carpets or drapes
Repairing or removing damaged wallboard or wall covering
Cleanup of ductwork

How to File a Claim

For insurance claim purposes, take before and after photos of the affected areas and itemize any property losses. Save all receipts related to repairs, cleaning, or damages and contact your Independent Insurance Agent as soon as possible.

Importance of Client Documentation

While it is impossible to avoid every single potential claim, there are plenty of risk management steps that can be taken to at least help defend such a suit. One of the most important steps that can be taken is to maintain proper documentation of your communications with clients. This becomes extremely important when the client and attorney disagree.

This came to light in a recent professional liability claim/ lawsuit. The CEO of a shipping company retained counsel to settle a dispute with the board of directors of his company. However, the CEO and Board engaged in settlement discussions without the hired counsel, who repeatedly advised the CEO not to proceed with the settlement. Nevertheless, the settlement was reached and the CEO stated on records that he understood and approved the settlement.

Two years later, the CEO filed a malpractice claim against his former counsel claiming it was their ineffective representation which led to the unfavorable settlement. The court ruled in favor of the law firm, as the CEO was unable to provide any evidence that he was not advised of the consequences of the proposed settlement. In fact, there were at least 13 separate documents that showed the CEO proceeded against the advice of his attorneys.

This case shows that a well-documented client file can go a long way toward defending a malpractice claim. When settling cases, attorneys need to be mindful of the possibility of buyer’s remorse and take precautions to avoid liability. Attorneys should be careful to explain all the terms of the settlement and give their client ample time to weigh their options. Attorneys should also document their explanation of the settlement terms and the client’s consent in writing. This may not stave off the buyer’s remorse lawsuit, but may help to preclude liability.

EDP Insurance Coverage

Electronic Data Protection (EDP) Insurance coverage can be one of the most crucial insurance coverages your law firm can purchase.

The data stored on computers and servers is one of the essential items firms possess. EDP protects you if all of your firm’s data is lost or destroyed.

Electronic data loss insurance does cover:

Lost or damaged electronic data. You never know when you may lose all your essential data, so you must be protected. It pays to replace or restore your electronic data that is lost due to an insured loss, e.g., a fire that destroys your computer system or a virus.

Interruption of computer operations. Data loss can severely impact a business. EDP policies can also include coverage for your law firm’s actual income and extra expenses incurred if you cannot operate the firm due to the data loss.

Electronic data loss insurance does not cover:

Your liability due to data loss (not a third party). A standard EDP only covers your losses due to lost electronic data, and it does not provide coverage for a liability you may have to a third party due to such losses.

Your mistakes. A standard policy doesn’t cover any losses due to a mistake in processing electronic data or mistakes made in your computer systems or networks’ design, implementation, or support unless those mistakes result in a fire that subsequently destroys the data.

Employee actions. A standard policy won’t cover any losses to electronic data if those losses result from your employees’ actions, whether intentional or not.

EDP insurance claims examples:

Fire
A small fire in your building destroys or damages your server. Your EDP insurance will cover the cost (up to your limit) of restoring that data and lost income.

What is employee benefits liability?

Most law firms offer health insurance to their employees. And while those benefits help attract and retain qualified workers, errors in your plan’s administration can lead to lawsuits against your firm.

For example, suppose your firm hires a new paralegal. The new hire completes the necessary paperwork to be enrolled in the firm’s health plan. However, due to a clerical error by one of the human resource employees, the new teacher is not enrolled in the plan. Sometime later, the teacher is hospitalized with a severe illness and discovers she doesn’t have any health insurance. As the medical bills pile up, the teacher seeks restitution for the mistake and sues the law firm. A general liability policy does not cover this claim but rather an employee benefits liability policy.

Employee Benefits Liability An employee benefits liability policy typically covers errors and omissions for the following:

Accurately describing plan benefits and eligibility rules.
Maintaining files and records related to benefits.
Enrolling, maintaining, and terminating employees, eligible family members, or beneficiaries in benefit plans.

Covered Benefits

What constitutes “employee benefits”? This term generally includes the following:

Insurance Life, accident, dental and medical, and other types of insurance
Plans Pension, profit sharing, stock ownership, and savings, and other plans
Benefits Social security, workers compensation, disability, and unemployment benefits
Additional Tuition assistance, maternity leave, etc.

Policy Limits

This Liability coverage usually includes two separate limits. The Each Employee limit is the most the insurer will pay for any one employee, their family members, and beneficiaries. The Aggregate limit is the most the insurer will pay for all acts, errors, or omissions.

Cost

Employee benefits liability is a relatively inexpensive coverage to purchase. Policies will start with an annual premium of $250 to $300 and increase as the number of employees at your firm increases.

If you are interested in receiving a quote for your law firm, please contact our office.

Dual-role Employees

A risk management position is an example of a role that, even when filled by a lawyer, frequently involves both legal and non-legal work. “Attorneys can be hired in a myriad of roles not requiring their status as attorneys,” says Richard T. Seymour, former chair of the ABA Section of Labor and Employment Law.

When determining whether a dual-role employee is acting as legal counsel and thus invoking attorney-client privilege protection, courts should focus on function more than a title. Status is not the same thing as role. While risk managers’ views may be partially influenced by their legal degrees, their employer is not necessarily looking for legal advice, as opposed to business advice.

Just because certain positions (like risk management positions) are not part of a company’s legal group and don’t require a law degree doesn’t necessarily reveal the employee’s accurate and complete role. Whether a dual employee is functioning as in-house counsel is not a bright-line test.

Rather than focusing on labels and bright-line tests, the emphasis should be on how the company utilizes risk management employees. There is a lot at stake in determining the applicability of privilege, so the focus should be on whether the company’s employees are reaching out to the risk management director to seek legal advice. Risk managers can deal with critical legal issues.

Bringing Risk Managers Within the Privilege

If the applicability of privilege to a risk management employee is driven by function rather than form, then companies should consider how to characterize and implement those functions. Companies should give serious thought to dual-role employees like risk managers. The intent to preserve privilege cannot be assumed—the company needs to be specific that legal advice is being sought.

Bringing risk management employees within the privilege requires planning and foresight. Place risk management departments under the supervision and control of their general counsel and have the general counsel issue instructions to them. Operational changes may also help a court see the department as more legal than business. These could include: (i) modifying risk managers’ job descriptions to state that the position will involve the company seeking legal advice concerning matters they handle; (ii) requiring risk managers to keep separate files for legal and non-legal matters, and (iii) limiting email discussions on legal matters only to those who need to be involved in legal discussions.

Litigation-related Claims

Litigation errors breed the largest number of malpractice claims reported each year. In recent years, errors arising out of litigation accounted for nearly 36% of all reported claims. In the vast majority of cases, the statute of limitation on the client’s case expired and there was nothing left to do but assess the damages.

Below are the top three errors that lead to malpractice claims for attorneys.

FAILING TO MAINTAIN A COMPREHENSIVE CALENDARING/DOCKET CONTROL SYSTEM

Lawyers miss deadlines for a variety of reasons, but the most common is the lack of a good calendaring and docket control system. It does not matter whether you use a computerized case management and calendaring system or an old-fashioned tickler box. The most important aspects of a good docket control system are that (a) all relevant dates, whether they be statutes of limitation, appointments, or discovery deadlines be entered into the system and (b) several advance warnings of each deadline be given to the attorney and support persons involved.

WAITING UNTIL THE LAST MINUTE TO FILE THE COMPLAINT

One of the biggest mistakes that leads to malpractice suits is the tendency for the plaintiff’s lawyer to file a complaint at the eleventh hour – on the eve of the statute of limitation deadline. Although the lawyer believes he is within the “safety zone” because the limitation period has not yet expired, filing at the last minute is often a risky practice. In many cases, the plaintiff’s lawyer may be unable to perfect service of the summons and must file an alias and pluries summons to keep the action alive.

Sometimes the lawyer and/or his support staff forget to calendar the date the original summons expires. As a result, the action is barred because the statute of limitation expires before the summons is renewed. Other times, the lawyer inadvertently names the wrong defendant, and the opposing party files a motion to dismiss on that basis. If the complaint is filed at the last minute, the lawyer has little or no time left to investigate and determine the name of the proper party before the deadline passes.

For these reasons, we strongly encourage plaintiffs’ attorneys to file the complaint well in advance of the statute of limitation deadline. Filing early will give you more time to fix mistakes such as improper service or naming the wrong party. Hopefully, this extra time will give you an opportunity to correct mistakes before a malpractice claim develops.

FAILING TO KNOW THE CORRECT STATUTE OF LIMITATION

Sometimes, even with proper docket control systems, the lawyer fails to determine the correct statute of limitation applicable to the case. As different jurisdictions and types of cases all have different time frames, it’s important to verify the applicable statute of limitation.

Occurrence vs. Claims-made Form

Most insurance policies for law firms consist of two coverage forms that determine how the policy will respond to a claim: occurrence form and claims-made form. We want to spend the next two posts explaining these two forms and how they can affect your law firm in the event of a claim.

Occurrence Form

Occurrence form is the most common type of coverage form for commercial insurance. Aside from professional and executive liability policies, occurrence is the prevailing coverage on almost every policy.

The term “occurrence” relates to the moment the claim/injury happens. Then, once the date of “occurrence” is established, the policyholder knows which policy (or policies) will respond to the incident. The policy in force at the time of the incident will be the one to defend the policyholder and possibly pay the damages resulting from the claim.

Unfortunately, as simple as the concept sounds, several different legal theories are used to identify when the claim occurs. Every state is different, and any one of the following precedents could be used to determine the occurrence date:

1. Injury-in-Fact: Some states consider that the date of ANY actual bodily injury or property damage is the date of occurrence regardless of the date of manifestation. (For example, the day the nail was driven into the electrical wire.)

2. Manifestation Theory: Most states consider the date the injury manifests itself or becomes evident as the occurrence. (i.e., the day the fire starts because of the nail driven into it. )

3. Exposure or Continuous Trigger Theory: Known by two different names, this is when the courts consider dates of exposure as the dates of occurrence. This usually means there will be multiple occurrence dates and multiple policies involved in the litigation and settlement of the claim. These types of claims rarely, if ever, affect law firms, and this primarily applies to claims for pollution or other incidents with a potential for a long exposure period.

For law firms, any one of the triggers could above apply depending upon your policy and the type of claim. However, as most law firms’ claims fall under general liability and business auto policies, it’s easy to determine which policy will respond.

Claims-made Form Differences

Unlike an occurrence-based policy, where only the date of occurrence must be determined (or occurrences – based on the legal theory applied), three dates must be known and decided to trigger coverage in a “claims-made” form. These important dates are:

1. The Date of Occurrence;
2. The Retroactive Date (found inside the policy); and
3. The Date the “Claim” is Made.

The date of occurrence was discussed in our last post, and the date the claim is made might be considered self-evident. However, the term “retroactive date” necessitates further explanation.

A retroactive date is a limiting provision in the “claims made” policy. If an injury or damage occurs BEFORE this date – the policy will not respond to the loss. If covered injury or damage occurs AFTER the retroactive date, the policy in effect when the claim is made will respond to defend and pay the claim.

For example, your employment practices liability policy has January 1, 2004, retroactive date, and the injury is determined to have occurred on November 1, 2003. The claim was then reported on February 1, 2004. In this example, the policy in effect on February 1, 2004, will NOT pay for or defend the injury because the occurrence/injury took place before the retroactive date. Even worse, the prior claims-made policy will probably not pay the loss because the claim was not made during the policy period.

Continuing the above-simplified example, if the retroactive date were January 1, 2003, the policy on February 1, 2004 (when the claim is made) would respond in defense or payment of the injury.

These examples highlight the importance of working with an insurance agency that understands claims-made policies and how they can affect you and your law firm.

If you have any additional questions, please don’t hesitate to contact us.

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?

No.

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:

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.
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.