The number of claims for legal malpractice is beginning to subside, according to the insurance industry. But the financial amount of the claims has increased.
A recent study showed that insurers are getting more claims for legal malpractice that are now over $50 million. The study was based on eight legal professional liability companies that insure more than 80 of the top 100 law firms.
Several factors contributed to the increase in the amount of claims – the complexity of the cases, the length of time the cases take to develop, and an increase in defense costs.
The largest number of malpractice claims have come in the area of real estate law. Corporate and securities law also produced a large number of claims. The malpractice claims are often the result of clients blaming lawyers when business deals don’t work out.
To reduce the risk against such claims, attorneys need to make sure they identify clearly who they are representing to avoid any appearance of conflict of interest. Conflict of interest is the leading cause of malpractice claims, according to the insurers. Attorneys also need to refrain from serving on the corporate boards of any of their clients.
When assessing the costs and benefits of mergers, law firms need to look at what risk issues such mergers represent in addition to the opportunities.
Other prominent liability insurance claims result from cyber security issues. These claims resulted from lost or stolen laptops, employee error, hackers, or the actions of a disgruntled employee.
Because technology has become such an essential part of business and law practice, cyber security risks are an ever present danger. Because of this, insurance experts cautioned that law firms need to examine how they share information and what client data they use and keep on their systems. Once they see where potential risks lie, they need to take steps to remove the risks.
In order to protect themselves against malpractice lawsuits related to cyber security, firms need to assess their risks across their entire firm and focus on risk management company-wide.