Handbook to Help Lawyers Manage Their Malpractice Exposure
WARREN, NJ, May 26, 2005 – “As many as one in five lawyers will face a malpractice suit this year—and the financial and reputational harm has the
potential to bring down an entire firm,” said James Rhyner, assistant vice president, Chubb & Son, and global lawyers professional
liability product manager, Chubb Specialty Insurance. “Lawyers must embrace their own risk management.”
Chubb’s new Managing Legal Malpractice: A Professional Liability Risk Management Handbook for Lawyers is designed to help law firms evaluate and manage their risk by focusing on the organizational and management structure,
internal policies and procedures, and risk financing.
“Lawyers are focused on protecting their clients’ interests, but many are not watching their own backs as well as they should,”
said Rhyner. According to the American Bar Association, attorneys in private practice have as much as a 17 percent chance
of being sued for malpractice each year. Severity of claims is also on the rise. The ABA notes that legal malpractice cases
of $2 million or more increased by 60 percent in a comparison of two four-year periods, 1996 to 1999 and 2000 to 2003. “In
addition, emerging exposures arising from new standards of care imposed by Sarbanes-Oxley, burgeoning duties to non-clients
and deepening insolvency allegations pose new risks that are increasing in both frequency and severity,” Rhyner said.
According to Rhyner, many small and medium-sized firms do not employ professional risk managers, and legal staffs are too
stretched to take on that role. Instead, Rhyner suggests that law firms collaborate with their insurance agent or broker and
other risk management professionals to help identify, reduce and insure their professional liability exposures. Chubb’s
handbook notes some steps a firm and its risk advisers can take, including:
- Review the legal ownership structure of the firm for clear definition of management structure, duties and responsibilities.
- Establish financial management protocols that are in line with the firm’s business strategy and philosophy.
- Ensure that the firm’s risks, its appetite for risks and its risk management practices are aligned.
- Establish a formal client intake process.
- Develop a policy to help firm lawyers avoid conflicts of interest.
- Institutionalize sound docket control and calendaring procedures to minimize missed deadlines—a leading source of malpractice
suits.
- Make sure the firm's professional liability insurance policy broadly defines “insured,” as well as key terms such as “professional
or legal services,” “loss” and “claim.” The policy also should offer a choice of counsel and advancement of defense costs.
For more information about Chubb’s Managing Legal Malpractice: A Professional Liability Risk Management Handbook for Lawyers contact a local Chubb branch office and for information on lawyers professional liability insurance visit www.chubb.com.
The member insurers of the Chubb Group of Insurance Companies form a multi-billion dollar organization providing property
and casualty insurance for personal and commercial customers worldwide through 8,000 independent agents and brokers. Chubb's
global network includes branches and affiliates throughout North America, Europe, Latin America, Asia and Australia.
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