Competence Ch4

MALPRACTICE - DEFENSES The attorney reasonably believed that the action was required by law or a legal ethics rule. Comparative or contributory negligence Assumption of the risks and failure to mitigate 34 MALPRACTICE - DEFENSES Statute of Limitations Does not run on a client’s claim while the lawyer continues to represent client Does not start to run until the lawyer discloses the supposed malpractice to the client, or the client knows—or reasonably should know– that the malpractice occurred. Does not start to run until the alleged malpractice significantly injures the plaintiff. 35 MALPRACTICE – VICARIOUS LIABILITY A law firm is civilly liable for injuries caused by an employee or principal of the firm who was acting in the ordinary course of the firm’s business, or with actual or apparent authority If the law firm is organized as a partnership without limited liability, each partner is liable jointly and severally with the firm. (Vicarious liability) Limited liability firms - A limited liability firm remains vicariously liable for injuries caused by an employee or principal, but the principals of the firm are generally not personally liable for the negligence or misconduct in which they did not participate personally or as supervisors. 36 MALPRACTICE & LAW FIRM PRIVILEGE Majority view (traditional view): if a current outside client threatened its firm with a malpractice claim, the attorney-client privilege does not apply to the consultations between the firm members representing the client and in-house counsel responsible for issues such as ethics and risk management. Thus, in any subsequent malpractice litigation, the former client could discover any written records of the internal consultations and depose firm members about related oral communications. NOTE: a few recent decisions have started a trend in the other direction. 37 CAUTION: LAWYERS & CORPORATIONS [Warning from largest malpractice insurer, ALPS] Avoid becoming a director, officer or shareholder of a corporation while also acting as the corporation’s lawyer. This dual role can create all kinds of problems to include loss of attorney client privilege, an increased risk of a malpractice claim, and an inability to participate in certain decisions. 38 CAUTION: LAWYERS & CORPORATIONS If you do find yourself on a client corporate board, do not further compound the conflict issues by taking an ownership interest in the company that exceeds 5%. At that point, the potential conflict problems reach a point where malpractice carriers will often decide to exclude the risk. Play it safe: do not take a financial interest in a client entity – difficult to prove later that you never put your financial interests above your client’s interests 39 CAUTION: LAWYERS & CORPORATIONS Never solicit investors on behalf of a client’s business. If and when that business goes south, you will be the one targeted for the recovery of all losses and malpractice policies do not cover investment advice. Also: for conflicts, the lawyer’s personal ownership interest inversely correlates with the independence of legal judgment. 40 MALPRACTICE – INSURANCE The ABA Model Rules do not require lawyers to carry malpractice; however, a growing minority of states require lawyers to tell potential clients if they do or do not carry it. Approximately half of the states now require lawyers to disclose whether they carry malpractice insurance. Different types of policies – high deductibles, caps on coverage, etc. You get what you pay for. 41 MALPRACTICE – INSURANCE OCCURRENCE POLICIES (USED TO BE COMMON) – covered lawyers for acts or omissions during the policy term, regardless of when the claim was asserted. “CLAIMS MADE” POLICIES (MODERN) – covers the lawyer for unforeseen claims made during the policy period, no matter when the incident occurred. If the lawyer has changed jobs or insurers, she may need supplemental “prior acts” coverage to prevent gaps in policy applicability. 42