Biglaw

Legal Malpractice Hitting 'Troubling New Heights'

Firms on a lateral hiring spree need to be careful.

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According to a study by insurance broker Ames & Gough, the cost of settling legal malpractice claims is rising — “reaching troubling new heights.” Eleven insurers were surveyed, representing malpractice insurance to 80 percent of the top 100 Biglaw firms, and it’s clear payouts under these policies are on the rise.

Of the 11 insurers surveyed, over the past two years, 10 made a claim payout of more than $50 million. Three participated in payouts in the $150 million to $300 million range, and four had claims of more than $300 million. However, due to claim limits and excess insurance, the study reports that it’s likely that multiple insurers participated in some of these big-ticket claims.

The report also identified the practice area with the most claims: trusts and estates, business transactions, and corporate and securities. Plus, insurance defense and taxation saw increases in claims.

And what types of errors are causing the issues, you ask? Conflict of interest, and clerical or scrivener’s errors lead the list. As the report notes:

“Given the larger size and increasing complexity of some business transactions, even an otherwise ‘simple mistake’ can lead to a large legal malpractice payout. Firms should be double- and triple-checking their work, with multiple eyes on the same document to ensure accuracy.”

The report also called out Biglaw’s booming lateral market. Though these moves are seen as a revenue stream for a lateral partner’s new firm, 35 percent of law firms have malpractice issues stemming from lateral partner hires.

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Kathryn Rubino is a Senior Editor at Above the Law, host of The Jabot podcast, and co-host of Thinking Like A Lawyer. AtL tipsters are the best, so please connect with her. Feel free to email her with any tips, questions, or comments and follow her on Twitter (@Kathryn1).

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