Federal District Court Draws Distinction Between Disciplinary and Malpractice Defense in Coverage Decision

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Professional liability policies for lawyers and law firms often distinguish between disciplinary and malpractice defense. Some don’t cover disciplinary defense or, if they do, include a much lower coverage limit. A recent decision from the U.S. District Court for the Western District of Washington underscored the practical impact of the distinction between disciplinary and malpractice coverage.

Chochrane v. American Guarantee & Liability Insurance Company, 2020 WL 3798928 (W.D. Wash. July 7, 2020) (unpublished), was a coverage action by a lawyer against her carrier. The lawyer’s professional liability policy included coverage for disciplinary matters—but the limit was only $10,000. A grievance had been filed against the lawyer. No separate litigation for malpractice, however, was involved. Although the disciplinary matter was eventually dismissed, the lawyer incurred substantially more than the $10,000 limit in fees and costs in her defense. Because a part of the grievance included allegations of malpractice, the lawyer argued that her carrier should cover the expenses above the $10,000 limit. The carrier declined and the lawyer brought a coverage case against the carrier.

via Fine Print: Federal District Court Distinguishes Disciplinary and Malpractice Defense in Coverage Decision — NWSidebar

Learn about Oregon’s Professional Liability Fund Primary Coverage plan here.

Idaho Allows Fee Disgorgement for Breach of Fiduciary Duty

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In a case of first impression, the Idaho Supreme Court recently held that fee disgorgement is available as a remedy against a lawyer for breach of fiduciary duty even if there are no resulting damages.

Parkinson v. Bevis, 448 P.3d 1027 (Idaho 2019), involved comparatively simple facts: A lawyer representing plaintiff Rebecca Parkinson in her divorce proceedings shared a confidential attorney-client communication with opposing counsel. In a subsequent lawsuit against the lawyer, Parkinson conceded that she was not damaged by the unauthorized disclosure—instead framing her claim as one for breach of fiduciary duty seeking fee disgorgement as a remedy. The trial court dismissed the claim, but the Idaho Supreme Court reversed.

The Idaho Supreme Court first distinguished breach of fiduciary duty from legal malpractice: “A breach of fiduciary duty claim is an equitable claim for which a defendant may have to disgorge compensation received during the time the breach occurred, even if the plaintiff cannot show actual damages.” 448 P.3d at 1033.

via Idaho Supreme Court Allows Fee Disgorgement for Breach of Fiduciary Duty — NWSidebar

A result of interest to Oregon lawyers, since a fee disgorgement claim not involving negligence is unlikely to be covered by the Professional Liability Fund.

 

The Continuum of Client Communication

We communicate with clients along a continuum – using emails, texts, letters, phone calls, video conferences, and in-person meetings.  When selecting a communication medium, what drives your choice?

 

When Your Convenience Determines How You Communicate

Choosing a communication medium that is most convenient for you is understandable. Odds are you’re busy, maybe overwhelmed.  You have information to convey and want to pass it along to the client quickly and easily.  More likely than not, you’ll fire off an email, maybe a text, or post a document and notify the client to login to your secure client portal.

  • This is perfectly fine if the information you have to convey is cut and dried: not controversial, unexpected, upsetting, or likely to provoke a series of questions.
  • For best results, prime clients at the first client meeting. Let them know to expect emails, texts, etc. when you have routine information to convey.

When Client Convenience Rules Communication

Some might argue this should be the gold standard 100% of the time: choose the communication method the client prefers or finds most convenient.

While I understand the spirit behind this point of view, it ignores some important realities. Consider this typical scenario: Client sends you a question by email or text, but is unclear in what she is asking or leaves out key details.  In the name of letting the client control the means of communication, you can:

  • Begin an inefficient exchange of messages in an attempt to clarify the question.
  • Spend an inordinate amount of time “issue spotting,” then answer every conceivable variation of the client’s real question.

Have I made this mistake?  Yes, indeed.  But the goal here is to do better. Neither of these choices is a good way to go.

  • Client convenience/preference can rule when you have straightforward information to convey.  [Spot a theme here?]
  • If the client is being murky, don’t text or email.  Pick up the phone.  You’ll get to bottom of the real question far more quickly.  Send back a quick message: “Let me call you to discuss this.  Is 2:00 p.m. a good time?”

Purposely Choosing a Communication Method that is Inconvenient for the Client

If we’re being truthful, most lawyers have done this at one time or the other.  You leave a voicemail at home because you know the client is at work.  You send an email late at night when the client is likely to be sleeping.  You mail a letter instead of picking up the phone to talk.

Avoidance, much?

If you occasionally choose a means of communication that avoids contact with your clients, don’t worry about it.  You might legitimately go this route to simply get something done.  [Your convenience is driving how you communicate.]

But if you find yourself avoiding clients (plural) repeatedly (chronically), stop and reflect. Most lawyers who choose an “avoidance” means of communication are doing it because:

  • They anticipate the client will be unhappy about whatever information it is they have to convey – or –
  • The client is already unhappy [which could be reasonable or unreasonable]

Chronic avoidance can become chronic procrastination, which is a no-win for everyone. Lawyers who repeatedly procrastinate are anxious, stressed, and sometimes depressed. They find it impossible to break the self-perpetuating cycle of avoidance: as clients become more and more unhappy because the lawyer isn’t communicating, the lawyer retreats even more – not checking email, not opening postal mail, allowing voicemail to fill up, not reading texts.

If you see yourself going down this path, or if you are looking for resources and advice on how to communicate bad news to clients, help is only a phone call away.  Contact the Oregon Attorney Assistance Program.  Assistance is free, confidential, and non-judgmental. Outside Oregon? There are national hotlines and lawyer assistance programs in other states.

Communicating in a Way that Builds and Supports Client Relationships

At the risk of revealing my bias, this is the sweet spot where you should strive to be.  So before talking on the phone really does become a lost art, try to cultivate a “relationship” approach when you communicate.  Follow these guidelines:

  • Talk about communication at your initial client meeting.  Let the client know what to expect and set the tone.
    • My goal is to keep you informed at all times during your case.  I will email (upload) routine updates and documents.
    • If you have a question, feel free to call (text, or email) me.  I set aside (mornings) (afternoons) to return calls and messages.
    • If the answer to your question is complicated, or if I need more information to give you an answer, I may ask to set up a telephone or video conference.
    • I like to meet with clients in person to (talk about settlement offers, prepare for deposition, prepare for trial, etc.)  If you want to meet in person, feel free to (call my assistant or me) any time to set up an appointment.
    • You are welcome to drop off documents (any time, after 1:00 p.m.).  If you want to talk (leave me a note or speak to my assistant so we can schedule a time to meet).
  • Consider the information you need to convey and remember your goal in communicating:  you’re trying to build and support a better client relationship.
    • Convey bad news in person, by video conference, or over the phone.
    • Discussing something complicated?  Use the same approach.
    • Is your client prone to anxiety?  Do you anticipate the client will have a host of questions?  Ditto on the approach.

Potential Legal Malpractice

If you’re an Oregon lawyer, call the Professional Liability Fund at 1-800-452-1639 and ask to speak to an on-call claims attorney in any of the following circumstances:

  • You believe you committed malpractice
  • The client is threatening to sue or is asserting you malpracticed
  • You are served with a summons and complaint

Firing a Troublesome Client

Sometimes the communication issue really boils down to the fact that you need to fire your client.  Read more about firing clients here.  Carefully review “Withdrawal from Litigation: Client Confidences,” OSB Formal Opinion 2011-185, Scott Morrill, Breaking Up Is Hard to Do: How to End a Relationship, Part II, and Helen Hierschbiel, Tying Up Loose Ends: How to End a Relationship.

[All Rights Reserved 2016 Beverly Michaelis]

Postscript

For another twist on the subject of client communication, see Linn Davis, Good Communications: Keeping Clients and Ethical Obligations Satisfied.

Coping with Mistakes

Mistakes happen.  The practice of law is complex, clients don’t always follow through as directed, and sometimes we commit errors.

The emotion of being caught up in a legal malpractice claim can be overwhelming:

A significant measure of a person is not whether he or she avoids trouble, but how he or she meets it when they find each other…. I have developed immense respect for many of our covered parties, not because of their perfection as lawyers (they weren’t perfect), but because of how they coped with the claim.
Bruce Schafer, PLF Director of Claims – Parting Thoughts: Lawyers are like other people.

Help is here if you are feeling stressed or overwhelmed

Take this advice from the Professional Liability Fund:

We recognize that having a legal malpractice claim filed against you is often very upsetting. Lawyers react in many different ways, including anger, loss of confidence, anxiety, avoidance, and inability to focus.  If you would like assistance coping with the stress or other challenges associated with a legal malpractice claim, the Oregon Attorney Assistance Program offers free and confidential support and assistance. Information you provide to OAAP Attorney Counselors is not shared with the PLF Claims staff, your defense counsel, or any other person. In fact, no information is disclosed to any person, agency, or organization outside the OAAP without your consent. For free and completely confidential assistance call 503.226.1057 or 1.800.321.6227 (OAAP).  NOTE:  We ask that you do not discuss the facts or merits of the case with anyone other than the PLF, defense counsel, or others with whom you maintain a legally confidential relationship.

Putting claims into context

One of the most important roles we fulfill at the PLF or OAAP is helping you put a claim in context:

  • You are not alone.  The PLF receives approximately one claim for every nine lawyers it covers.  More than 80% of lawyers in practice 20 years or more have had a claim.
  • Having a strong reaction to an allegation of malpractice is very common.
  • There is never a downside to contacting the PLF or OAAP.  Our services are confidential and we are here to help.
  • The PLF has two claims attorneys on call every day to talk to Oregon lawyers. You should contact the PLF if you are served with a summons and/or complaint; you are concerned that you may have made a mistake; a client indicates that you have made a mistake; someone threatens you with a claim or makes a demand for damages against you; you receive a subpoena, or someone requests information, documentation, and/or testimony about your representation of a client.  Call the PLF even if you are concerned that the claim may not be covered.
  • At least one Attorney Counselor is on call daily at the OAAP office.  The OAAP is available to assist with any issue that affects the ability of a lawyer to function effectively.
  • The PLF has four practice management advisors on staff who are available to help you take action and constructively move forward with office system improvements.

All Rights Reserved [2015] Beverly Michaelis

 

Malpractice Claim Trends in Oregon [Infographic]

The 2013 Professional Liability Fund Annual Report is now available for Oregon lawyers on the PLF Web site.  The report reveals the following legal malpractice claim trends and data:

Number of claimsAverage Cost Per ClaimFrequency of Claims by Area of LawCost of Claims by Area of Law