20:33, June 30 305 0 law.com

2017-06-30 20:33:05
Lateral Hazard: Legal Malpractice Claims Rise With New Hires

Don’t want to get sued for legal malpractice? Here’s one over-lawyerly solution: Don’t hire lateral partners.

A survey of legal malpractice insurers states that conflicts of interests, often brought about because of lateral recruits, are the most common claim for malpractice suits.

But for those who don’t live in absolutes and instead want some practical business advice—and isn’t that what all good lawyers offer?—the survey conducted by insurance broker Ames & Gough also provided pointers about adding laterals without the headache.

Those tips mostly involved introducing a firm’s new partner to the existing partners and their clients to ensure conflicts of interest are avoided. Firms can do that in a number of ways, including assigning a mentor to the new partner; assigning laterals to a firm-wide committee; or providing the new lateral with a list of their new firm’s clients.

“All too often, a lateral is left to their own devices,” according to the survey.

Ames & Gough, which has previously polled the insurance market, asked nine insurers that together cover 80 percent of Am Law 100 firms. The study also found that malpractice claims stabilized last year when compared to 2015. But claims still remain well above their pre-recession levels.

At the same time, the cost of defending malpractice claims is on the rise. That is largely due to increasing hourly rates charged by insurance lawyers.

Six of the nine insurers in the survey saw an increase in the rates they pay for defense counsel rise by up to 2 percent. Four insurers saw rates increase between 2 and 5 percent, while one insurer saw rates jump more than 5 percent.

Cyberattacks are also causing a rise in malpractice claims. Five of the nine insurers polled saw an increase in cyber-related legal malpractice claims within the past year. Of that group, four insurers indicated that most of the claims involved hackers.

DLA Piper was among the corporate victims of a global cyberattack this week that crippled the firm’s email and phone systems. The Ames & Gough survey suggested that firms purchase cyber liability insurance. On that front, many firms have phone calls to make.

A separate poll by consulting firm LogicForce found that 23 percent of firms polled had cybersecurity insurance policies, although another 40 percent were unaware of data breaches.