Managing Risk

Limit Your Areas of Practice to Serve Clients

The Jack-of-All-Trades lawyer runs a greater risk of committing legal malpractice.

by Anne E. Thar

Legal malpractice claims statistics show that general practitioners receive a disproportionately higher number of claims than lawyers who concentrate their practices in a few areas of the law. Furthermore, one out of every 10 legal malpractice claims is caused by a lawyer's failure to know or properly apply the law.

Failure to Know the Law

The statistics above reinforce the notion that attorneys who attempt to be all things to all clients are at a greater risk for legal malpractice. The following claims demonstrate this point.

Claim No. 1. Lawyer Brown has been in practice 10 years. While she concentrates in personal injury and employment law litigation, Brown feels compelled for economic reasons to take the occasional divorce case that comes her way. Besides, Brown reasons, "Anyone can do a simple divorce."

Lawyer Brown agrees to represent Client in her divorce. As part of the settlement, Client will obtain title to the family home, which the couple has owned for 30 years. Client informs Brown that after the divorce, she intends to sell the home, move to Arizona, and start a new life. As soon as the divorce is final, Client sells the home and discovers that she is personally responsible for a whopping capital gains tax generated by the sale. Client sues Brown, who never considered the tax consequences of the sale in negotiating the terms of the divorce.

Claim No. 2. Lawyer Smith has maintained a general solo practice for 30 years. Smith prides himself on being a "full-service firm." In other words, Smith feels competent to handle any type of legal matter that may arise. After all, he has followed this philosophy for 30 years and never been sued for legal malpractice - until now.

Lawyer Smith agrees to represent Client in the sale of his asphalt business, Asphalt Co. Client forgets to mention to Smith that several years earlier, Client executed an indemnity agreement with Bond Company pursuant to which Client is personally liable for any defaults by Asphalt Co. In exchange for the indemnity, Bond Company regularly issues performance bonds for the projects undertaken by Asphalt Co. Because Lawyer Smith has never represented a construction-related company, he doesn't think to ask Client about indemnity agreements. As a result, nothing in the buy-sell agreement addresses this point. Client, on the other hand, assumes that the sale will extinguish all of his liability with respect to Asphalt Co.

After the closing, Bond Company continues to issue bonds for new projects undertaken by Asphalt Co. Bond Company is not advised of the change in ownership. New Owner defaults on one of the contracts and Bond Company is obligated to pay $75,000. Bond Company then pursues Client under the terms of the indemnity agreement. Client in turn sues Lawyer Smith for failing to terminate Client's liability to the Bond Company as part of the terms of the sale.

Claim No. 3. Lawyer Jones practices primarily in worker's compensation and plaintiff's tort litigation. Jones is hired by Client to represent him regarding injuries he sustained while operating a punch press at work. In addition to filing a worker's compensation claim, Lawyer Jones also files a products liability action against the manufacturer of the punch press.

The manufacturer subsequently files for bankruptcy. Rather than engage co-counsel to assist her in the bankruptcy aspects of the case, Jones continues to handle the matter on her own. As a result, Jones fails to make a timely claim in the bankruptcy case on Client's behalf. Client hires a new lawyer and sues Jones for legal malpractice.

Claim No. 4. Lawyer White's suburban practice is driven primarily by the needs of his clients because he finds it impossible to say no. White has never felt comfortable with tax issues and therefore has shied away from wills and estates. Lawyer White is approached by a couple whom he represented a few years previously in a small personal injury matter. Clients ask Lawyer White to prepare their wills. White initially tries to decline the engagement but eventually capitulates when the couple insists they simply wouldn't trust any other lawyer in town.

Before agreeing to represent Clients, White asks Clients whether their taxable estate is worth more than $650,000. "Oh no," state the couple. "Our home is only worth about $200,000." Clients erroneously believe that their life insurance policies and IRA accounts are exempt from estate taxes and therefore don't mention these assets to White. Based upon their verbal response, Lawyer White never bothers to have Clients fill out a form detailing their assets. White has Clients execute simple wills. After the death of one of the Clients, Lawyer White is sued when it becomes apparent that trust documents could have reduced the estate taxes.

Guidelines to Prevent Malpractice

To avoid legal malpractice claims stemming from a lack of knowledge or familiarity in a particular field, consider the following guidelines.

1. Recognize you cannot be all things to all people. The law is too complex and changes too quickly today to assume you can do it all - even after many years in practice. In short, there need to be some boundaries to the type of legal work you will accept. Make a list of the areas of the law you feel competent to perform and stick to those areas.
2. Don't deviate from your areas of competency as favors to friends, relatives, or long-time clients. In the long run, you serve neither your client nor yourself when you take a matter beyond your knowledge. And don't think that your neighbor, brother-in-law, or most tenured client won't sue you. They will, and your malpractice carrier has the claims to prove it.
3. Watch out for the curve ball. Even "specialists" must recognize when a particular matter is leading them down an unfamiliar path. At that point, ask an expert for assistance.
4. When in doubt, talk the matter over with a colleague who is more proficient in the area in question. To accomplish this, you will need to develop a network with other lawyers. Active participation in a bar organization is an excellent way to network and find out who concentrates in the areas in which you may need advice. (Please see the accompanying sidebar on the State Bar's Lawyer-to-Lawyer Directory.)
5. Give a little, get a lot. The best way to develop those networks is to be generous with your own time. Lawyers are more than willing to assist a colleague if they know that the courtesy will be returned. It just might help us all feel a little better about the practice of law as well.

Anne E. Thar , Northwestern 1983, is vice president and general counsel of the Illinois State Bar Association Mutual Insurance Company.

6. If you want to develop an expertise in a new area of the law, try co-counseling with a more experienced lawyer until you feel secure enough to handle such matters on your own. If you do co-counsel, make sure the client approves of the relationship and the fee-sharing arrangement in writing. Continuing legal education seminars also can be valuable, but are no substitute for working with an expert. Finally, research which periodicals and resources the practitioners in that field find most valuable and then subscribe to them.
7. Stay out of foreign jurisdictions. Keeping current with the law in your own jurisdiction is difficult enough.
8. Develop detailed checklists. Every lawyer should have some type of checklist for the legal matters he or she undertakes, whether it's a divorce, a residential real estate closing, a personal injury claim, or the sale of a small business. Checklists not only enumerate the tasks to be accomplished but also can highlight the legal issues that must be considered in handling the matter.

Wisconsin Lawyer