Refreshed, relaxed and picking up a slight Chicago accent from a week long vacation, I came back to work with a few potential clients interested in lawyers E&O. Somewhat organically, recently I've been gaining traction in the errors and omissions insurance arena with law firms. I've worked with many different types of law firms to date: insurance law, construction defect, personal injury, labor employment, etc. The list could go on and on. As many different types of law as there are, there is one disturbing trend that is rising: malpractice or professional liability claims filed against law firms in 2011.
It shouldn't come as a shock to me, the insurance carriers, the law firms or the general public. We all know that as the market declines and investments fold, lawsuits historically rise. As a clients financial status spirals downward, they are more inclined to seek relief from advisers and professionals, such as lawyers. A study performed by Ames & Gough noted that real estate was the practice area generating the largest percentage increase for new claims. After real estate falls corporate & securities and trusts & estates leading the pack.
Ames & Gough "cited two key drivers for the rise in real estate-related legal malpractice claims: one, being the sheer increase in transactions from 2005 to 2008, bringing with them more closings and increased risk of errors. The second, plummeting property values compounds this situation, as buyers and lenders look to the parties involved in the transactions to lay blame and seek to recoup their losses."
So what does this mean for you as a potential client? Well, if for some instance you do have to hire a lawyer to represent you or your business in any way, shape or form, you should confirm two to three very important items:
1.) Confirm the firm representing you has errors & omissions coverage. No respected man or woman of the law can or should practice without errors and omissions coverage.
2.) In your initial interview, don't be afraid to ask your lawyer if there are any current malpractice suits against him or her. If there is a lawsuit against your lawyer or firm, it doesn't necessarily mean that your lawyer isn't up to par. But, this is where your gut instinct should weigh a bit heavier in the decision making process.
3.) References, references, references. Do your research on the law firm or lawyer you would like to hire. Check out Yelp and any other reviewing websites there are. Ask friends, colleagues and business associates for their opinions.
In these times, I'm seeing some law firms put up minimal errors and omissions insurance limits. And unfortunately, due to this study and many others, they should be doing the exact opposite. As economic times get tougher, we often think about where we can cut back to save monetarily. Errors & Omissions insurance should not be one of those cut backs....especially if you are law firm or lawyer.