Legal Malpractice Payouts Soar, With Virus Claims Looming

by | May 17, 2021 | Important, law firms, News | 0 comments

Courtesy of Law360: May 14, 2021

By Kevin Penton

Legal Malpractice Payouts Soar, With Virus Claims Looming

Legal malpractice claim payouts were the highest on record from 2019 through the middle of 2020, with the figures expected to remain high after the end of the COVID-19 pandemic, according to a new report by insurance broker Ames & Gough.

While the number of claims filed during the period remained relatively flat compared to previous years, the size of payouts surged, according to Ames & Gough’s annual survey of 11 leading lawyers’ professional responsibility insurers, which together provide insurance to 80 of the 100 largest law firms in the U.S. by revenue.

Nine of the 11 insurers surveyed reported participating in a claim payout that exceeded $50 million during the period, with two paying a claim between $150 million and $300 million and four paying a claim that topped $300 million, according to Ames & Gough.

The same number of insurers said the frequency of their claims either decreased or stabilized between 2019 and 2020, with one insurer reporting a 6%-to-10% increase in claims and the other experiencing a hike that fell between 11% to 21%, according to the report.

“Although the slowdown in frequency may appear to be a silver lining in an otherwise difficult year for legal malpractice claims, it may just be temporary,” said Eileen Garczynski, a senior vice president and partner for Ames & Gough, in a statement on Friday. “The economic downturn from the pandemic may lead to more claims.”

The largest number of malpractice claims were concentrated in the practice areas of corporate and securities, business transactions and trusts and estates, according to the report.

Trusts and estates led the way for the first time as the practice with the most claims filed, perhaps reflecting a large number of baby boomers looking to transfer wealth to the next generation, and some relatives filing malpractice claims against lawyers for work performed on behalf of an elderly or sick client, according to Ames & Gough. Business transactions and corporate and securities were the other two practice areas with large numbers of claims.

Many of the malpractice claims appear to be rooted in how attorneys communicate with their clients, with insurers citing failure to obtain consent, poorly documenting a file, failing to either obtain or update an engagement agreement, or derogatory statements against clients as among the leading contributing factors, according to the report.

Failure to know the law was amongst the top leading causes of malpractice claims, which Ames & Gough suspects could fuel future malpractice claims related to COVID-19, given the numerous changes made to state and federal regulations in areas such as labor and employment, health care and tax laws.

“Unfortunately, those dusty old legal guides were probably not very helpful to attorneys working in such rapidly evolving situations,” Garczynski said. “So, in all likelihood, we’ll start seeing additional legal malpractice claims resulting from errors made.”

 For a complimentry copy of the 2021 Ames & Gough LPL Claim Survey please email Eileen Garczynski   at egarczynski@amesgough.com