The phrase, “If you don’t like the weather, wait a minute” has been attributed to many authors (including falsely to Mark Twain and Will Rogers) and regions of the United States. Whatever the source, the saying certainly is true in Wisconsin. As we move through summer, risk of severe weather carries a threat of natural disasters – thunderstorms, tornadoes, floods, and others. When severe weather “opens the floodgates” to natural disasters, it is imperative that law firms be prepared, understand insurance for disasters, and address the ethical obligations lawyers have to their clients in the wake of devastation.

Be Prepared

In 2012, Tom Watson, now president and CEO of Wisconsin Lawyers Mutual Insurance Co. (WILMIC), wrote an article¹ after a fire decimated an office building in Madison, affecting a dozen law firms and interrupting their practices. In it, he wrote about the importance of preparing for the worst. The same guidance applies to weather-related disasters.

Watson wrote, “A good business-continuation plan will include a set of procedures that defines how your office will continue and how it will recover its critical functions in the event of an unplanned disruption.” The results of a law firm’s downtime are many and might include loss of income and clients; loss of future or potential income or potential clients; lost productivity; idle-employee costs; unanticipated business expenses, such as​​ late fees or penalty payments; missed deadlines and appointments; and even malpractice claims. To summarize Watson’s article, the first steps in preparing a business continuity plan are the following:

1. Review insurance policies (see below).

2. Establish a target recovery time for the practice.

3. Put people first – establish a procedure for notifying and accounting for all employees (every employee should have a written copy of the policy that they keep off the premises).

4. Establish evacuation procedures.

5. Keep the employee directory current.

6. Arrange an alternative work site (for example, a satellite office, rented facility, or colleague’s office).

7. Protect electronic data – establish backups and test them regularly.

8. Identify, protect, and recover vital and valuable documents.

9. Practice using the plan and review and update it regularly.

Although weather-related disasters are unavoidable and can significantly affect a lawyer’s practice, being prepared and then using available resources can help firms to quickly resume operations.

Understand Your Insurance Needs

Ordinarily, WILMIC addresses issues related to lawyer’s professional liability insurance. It’s what we do, and we do it well. However, other insurance also is necessary. The specific types of insurance policies and limits needed for a firm can vary. The U.S. Chamber of Commerce² has reported a 24.6% national increase in the number of new businesses started in 2021, likely a result of people seizing new opportunities presented by the COVID-19 pandemic. Owners of law firms, new or existing, have a lot to protect.

One of the most common means of insuring a business is with a commercial insurance package, sometimes called a business owner’s policy (BOP), which is a bundled insurance policy that covers several areas of risk for a business. Policies like a BOP exist to cover companies that generally face the same risks. However, a BOP can be custom-made to fit a law firm’s specific business. This means it can be appropriate for law firms of any size, especially small ones. Law firm owners should customize their BOP from the beginning to protect against losses and damages. A BOP is designed to provide protection in a variety of situations and can include policies for general liability insurance, commercial property insurance, and business income or business interruption insurance (which covers business income lost due to events such as natural disasters). By bundling key policies, a BOP can help law firms get basic and essential coverage, often at a lower cost.

A qualified insurance agent will take the time to analyze business needs, develop a plan that is customized and responsive to the specific situation, and offer a package that reflects the customer’s exposure and experience. Equally important, an agent will help identify the coverages and limits the customer needs to be adequately covered in the event of a natural disaster.

One of the more severe natural disasters is flooding. In general, flood insurance is excluded on the commercial property insurance policy and must be purchased separately. Jon Oaks,³ president of American Advantage-Lindow Insurance, says, “There are cases where if your property is located in a floodplain and there is a mortgage, the lender will require coverage. Otherwise, it is up to the property owner to decide if they want flood coverage and purchase it from their agent.” Even if property is not within a floodplain, it is still important to consider coverage. Oaks states, “Some carriers are starting to create endorsements for inland flood coverage that can be added to a policy.”

Oaks has personal experience with the destruction that water can cause. “At about 7 p.m. on Sunday, January 9, 2022, I got the call on my cell phone that no business owner wants: it was our property manager informing me that our office unit had significant water damage … the drive to our office was filled with mixed emotions – nerves from not knowing what to expect and irritation from my interrupted Sunday night. I met the property management team and opened the door to six inches of water on the floor and humidity that indicated the water had been there for the better part of the weekend. As it turned out, a sink from the dentist office above had malfunctioned sometime between Friday afternoon and Sunday, leaking water into our space.”

Oaks said the claim broke down into three parts:

• Cleaning up the water,

• Assessing the damaged business property, and

• Restoring the physical space to good condition.

Fast forward to April 1, after nearly three months of estimates, repairs, renovations, and replacements: Oaks was back in his office space and firing on all cylinders. “As I have told many – and now can confirm having lived through one of these – we can help with the monetary parts of the claim (ours went about as smoothly as it could), but one should not underestimate the stress and additional hours of work that come into play when everything is gone and you have to replace it all.”

Ethical Obligations

A lawyer’s professional responsibilities to clients don’t cease in the event of a disaster – instead, they become more challenging. As Aviva Meridian Kaiser, State Bar of Wisconsin ethics counsel, wrote in a 2019 article,⁴ it isn’t merely good practice to develop and maintain a business continuation policy; lawyers have ethical duties to take certain actions. Kaiser discussed ABA Formal Opinion 482, an ethics opinion⁵ on the subject, which “reflects a perception that through ‘proper advance preparation and taking advantage of available technology,’ lawyers should be able to continue to represent their clients uninterrupted regardless of the type of disaster.” In other words, there might be no rest for weary lawyers who are victims of a disaster when it comes to representing their clients.

Here are a few rules to consider in the event of a disaster:

• Model Rule 1.4 – Communication. ABA Formal Opinion 482 explains that with current technology, lawyers should have alternative means by which they can communicate with their clients, even if regular office communications are inaccessible.

• Model Rule 1.15 – Safekeeping property; trust accounts and fiduciary accounts. ABA Formal Opinion 482 acknowledges that electronic storage of documents has become so prevalent that it may be unreasonable not to store documents online or in the cloud – not just to protect documents but also to reconstruct them if physical copies are destroyed. Rule 1.1 – Competence and Rule 1.3 – Diligence require that once the lawyer realizes that files have been destroyed, the lawyer must make every effort to reconstruct the file from any available source, including the court, opposing counsel, or even the client. If the lawyer is unable to reconstruct the file, the lawyer must notify the client. Kaiser notes, “To avoid the difficulties created by this situation [destruction in a disaster of documents of intrinsic value], lawyers should consider returning all original documents and documents with intrinsic value to clients at the end of the representation.”

• Model Rule 1.6 – Confidentiality. Lawyers also might have an obligation to notify their clients of security breaches. Client papers that are not outright destroyed may be scattered inside or outside the office. To the extent that this results in a potential breach of confidentiality, the lawyer would have an obligation to notify clients.

Conclusion

One of the more difficult tasks in Wisconsin is accurately predicting weather. Natural disasters can strike at any time.

Adequately insuring against potential losses is essential, and consultation with a well-qualified insurance agent can ensure proper coverage. And, being prepared with a thoughtful business continuation plan with due consideration given to technology can help lawyers get back to work after disaster strikes.

Finally, don’t hesitate to contact colleagues, claims adjusters, or the State Bar with questions. They may have resources or suggestions to help you “close the floodgates” and reestablish your practice to meet your ethical obligations to your clients.

Endnotes

1 Prepare a Disaster-Recovery Plan Before Disaster Strikes, www.wisbar.org/​newspublications/wisconsinlawyer/pages/Article.aspx?Volume=85&Issue=7&ArticleID=8704.

2 U.S. Chamber of Commerce, How the Small Business Sector Has Grown Throughout the Pandemic, www.uschamber.com/on-demand/economy/how-the-small-business-sector-has-grown-throughout-the-pandemic (Oct. 21, 2021).

3 https://lindowinsurance.com/.

4 Disasters and a Lawyer’s Ethical Obligations, www.wisbar.org/NewsPublications/WisconsinLawyer/Pages/Article.aspx?Volume=92&Issue=1&ArticleID=26787.

5 ABA Formal Op. 482, Ethical Obligations Related to Disasters (Sept. 19, 2018), www.americanbar.org/content/dam/aba/administrative/professional_responsibility/aba_formal_opinion_482.authcheckdam.pdf.

» Cite this article: 95 Wis. Law. 39-41 (July/August 2022).