The overwhelming majority of law firms lack the resources to employ in-house ethics counsel full time. Nevertheless, responsible small and midsize firms must be prepared to address thorny ethical questions or claims of wrongdoing if and when they arise.
Law firms must know where to seek help before
a problem arises. Depending on how difficult the question is, here are at least four potential sources of expertise:
- A senior lawyer who can bestow sage advice.
- The State Bar Ethics Hotline (800/238-4427).
- Similar toll-free ethics and risk management hotlines provided by many malpractice insurance companies. (See California Lawyer
's "2014 Professional Liability Insurance Report
" [February], online at www.callawyer.com.)
- Prevetted outside ethics/professional liability counsel. An excellent resource for this is the Association of Professional Responsibility Lawyers, which publishes a member list on its website, www.aprl.net
Lawyers should be familiar with how to handle various scenarios that commonly come up. Here are some examples, with suggestions on how best to address them.
"I think we screwed up."
When an attorney believes that a mistake may have been made, the two most important risk-management principles are (1) don't cover it up and (2) communicate concerns orally
to the extent possible. Unfortunately, too many attorneys "think out loud" via email under the mistaken belief that such communications will be privileged should litigation follow. That may be a serious miscalculation. (See Cal. Evid. Code § 958.)
At this stage, the responsible attorney needs to do some informal fact gathering and determine relatively quickly if there is any credible indication that the concern is valid.
"I know we screwed up."
If it is obvious that an error has been made, the firm will need to shift into disclosure mode, not only to its professional liability insurer, but almost certainly to the client as well.
Even if no formal claim has been asserted, the insurer should be notified because every malpractice policy contains a variation on the following admonition: "The Insured shall not, except at its own cost, make any payment, admit any liability, settle any claims, assume any obligation, or incur any expense without the prior written consent of the Insurer."
Accordingly, it's critical to secure the insurance company's prior blessing on any contemplated client disclosures (which will likely be necessary because of the conflict of interest that is inevitable in the malpractice context). Invariably it is in the best interests of both the law firm and the insurer to make any client disclosure after
consultation with seasoned outside counsel.
"The client (incorrectly) thinks we screwed up."
Often this is the most difficult situation, given that allegations frequently are frustratingly vague. Moreover, just because a circumstance isn't strictly a "mistake" today doesn't mean it can't or won't ripen into one tomorrow.
On the insurance front, even when an allegation is objectively spurious, it still should be reported to the carrier. The upside of taking a wait-and-see position is usually negligible while the downside is severe indeed - a denial of coverage based on late reporting, including being on the hook yourself for any judgment, not to mention the attorneys fees and costs of defense. In conjunction with reporting to the insurer, the law firm needs to determine whether the attorney-client relationship is salvageable. Input from experienced outside counsel is invaluable, and a frank discussion with the aggrieved client is typically a must.
Perhaps the best indicator of whether the engagement is still viable is whether the next bill is paid, promptly and in full. If not, this should be considered a bright red flag; take steps immediately to disengage.
"The client (correctly) thinks we screwed up." This is perhaps the most straightforward scenario.
The matter needs to be promptly reported to the professional liability insurer. Once that happens, cooperative planning can occur, which almost always involves retaining outside defense counsel. In rare circumstances the attorney-client relationship can continue so as to mitigate damages, but supplemental disclosures will need to be made to the client and a conflict waiver secured.
Every law firm should work to minimize mistakes, but smart lawyers recognize that they can and do happen. The important thing is to be ready to respond appropriately.
Rian Jorgensen is a lawyer and senior vice president at Ahern Insurance Brokerage, which specializes in insurance for law firms.