Economic Downturn Means More Malpractice Suits
With the economy down, look for legal malpractice suits to increase, says a bulletin by Marsh Inc., a global insurance broker and strategic adviser. The bulletin, summarized in The Insurance Journal, identifies several new risks that may arise due to the slow down:
-- Contract scrutiny: Experience shows that contract details are more heavily scrutinized during periods of economic downturn. [...]
-- Looking for others to blame: frequently, the scoping of engagement is not sufficiently robust, and formal disengagement is not usually a standard process at major law firms. This means that when things do not work out as a client desires, the client may attempt to seek compensation from the law firm alleging poor advice. [...]
-- Client selection: will firms be tempted to take on the 'wrong type' of client as good work slows down? [...]
-- Impact on smaller businesses: Smaller law firms could be affected by an increase in the detection of mortgage fraud. Some insurers have remarked to Marsh that incidences of mortgage fraud backed by organized crime have begun to surface in the claims notifications of some of the smaller law firms involved in, particularly, 'buy to let' transactions.
There's also one final risk that the article doesn't mention. In slower times, firms may be tempted to take on weaker professional malpractice cases that they may have declined in busier times.
Has your firm taken steps to review its retainer agreement or screen clients to protect itself against possible claims? Or are firms beginning to feel desperate enough to take on questionable cases or clients that a year or two ago would have been rejected out of hand?
Posted by Carolyn Elefant on June 17, 2008 at 03:40 PM | Permalink
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