Reduce Liability Claims

Practice Advice

Can Office Automation Reduce the Exposure to Professional Liability Claims?

The statistics that have been accumulated by the American Bar Association from insurance companies show that in any given year lawyers in the various states will have between 2 and 5 claims per 100 lawyers insured. The data does not include claims against uninsured attorneys nor does it include complaints filed with the various regulatory authorities. California has the highest frequency while others will have varying results.

In addition to formal claims, there are the clients who for various reasons are unhappy with the experience. Some become fee collection problems while others just go away never to return, but may inform there friends, family and business associates about their dissatisfaction with a particular lawyer or firm.

Regardless of the scenario, the results are not what you would wish for the ongoing growth and prosperity of your practice. The impact of a claim or disciplinary proceeding is more than just financial, even if you are insured. Besides deductibles, there is the loss of billable hours. Lawyers who have gone through the experience talk about emotional trauma, schedule interruptions, damaged reputation, and a negative impact on their ability to concentrate and perform as well as office moral and partner relationship problems. A well run and efficient office can greatly assist you and your firm in avoiding these types of problems.

Unfortunately, the data does not give you the fact pattern involved in the individual claims. It is simply an accumulation of all the claims filed and coded to a prescribed list of data points which may or may not fit the fact pattern. A couple of examples are:

A workers compensation specialist is sued by a former client for not pursuing a product liability claim against a lathe manufacturer. This claim would most likely be coded as a failure to know or properly apply the law or, perhaps a failure to act with a statute of limitations since the former clients product liability claim is now time barred. The actual error, if there was one at all, is the failure to document the scope of the representation at the onset of the case advising the client that the attorney was only handling the worker's compensation matter.

A business client asks his lawyer to meet with an employee of his whose husband had a potential medical malpractice claim. The recollections of the meeting differed between the attorney and claimant. The attorney stated that his firm did not handle medical malpractice cases and that other advice should be sought from experienced counsel and that it should be sought soon as there is a two statute of limitation. The claimant's recollection was that the attorney stated there was no case, but that he would discuss the matter with his partner and call if his opinion of the case changed. Subsequently, a claim was brought against the firm and a judgment obtained of over $600,000. See John R. Togstad v. Vesely, Otto, Miller & Keefe, 291 N.W. 2d 686. This claim would most likely be included in the ABA data as a failure to calendar properly when a more accurate cause of loss would be the failure to document the meeting and generate a non-engagement letter.

These are just two examples of where a practice management system could help avoid claims. Sample letters provided by many bar associations and professional liability insurers implemented in an automated system would have enabled the firms in these examples to easily and professionally address these issues. Documentation issues would also have been addressed.

A list of some additional potential positive implications of the use of practice management software is as follows:

Improved quality of service levels and work product.
Lower cost of service delivery through work flow efficiencies.
Attorneys spend less time on office function and more time practicing law which has a positive effect on a number of issues including morale and job performance.
Rules based options give the practice an opportunity for organization and control difficult to obtain without automation.
Template importation saves time, money and prevents errors. A further benefit is the opportunity to use recommended documents and procedures from sites such as Henshaw and Culbertson's.
The proliferation of this type of software may create a new standard of care where the failure to employ these systems may be deemed a failure to meet the standard of care in a particular state or area of practice.

Beyond these general statements, the following are areas where I believe the systems could prevent losses:

Personal Injury

20 to 25% of the claims are on files that were personal injury matters. This data does not tell us whether or not the attorney normally practices in this area, just that this was the area of law were the claim was incurred. While the most prevalent error made is the missing of a statute of limitations, there are also other causes of loss.

The calendaring and rules incorporated into a good system can prevent statute losses and other time related losses in a number of ways.

Integrated third party rules of civil procedure and similar imposed deadlines are built into the calendaring and docket control system.
Firm generated practice rules and procedures are also built into the calendaring and docket control system as well as the to-do and reminder system preventing missed deadlines.
Automatic inactivity detection bringing a matter to the firm's attention if left unattended for an extended period of time.
Extensive documentation and use of template forms required by practice rules can prevent claims by use of non-engagement letters or by engagement letters that define the scope of representation.
Checklist, reminders, alarms and other features keep cases on track and moving toward settlement. Procrastination or failure to react to calendar losses is reduced.

Real Estate

15 to 20% of all claims are in the real estate area of practice. A number of claims are caused by errors in the preparation, filling, transmittal of documents category, which is about 20% of the claims by type of activity.

The use of forms and standard documents is common in this area of practice. The document completion and management capabilities of automated systems provide many opportunities to reduce or eliminate errors, such as names and property description errors. Failure to complete task in a timely manner have also contributed to errors in this area of practice. The date and workflow control of these programs will reduce claims from this cause of loss.

Family Law

8 or 9% of the claims are derived from this area of practice. The largest percentage of errors in this category is related to document preparation. As previously stated, the capabilities of the various programs enhance both the accuracy and timeliness of document preparation.

Estate, Trust and Probate

Approximately 7% of the claims are from this area of practice. The largest percentage of errors in this category is related to document preparation. As previously stated, the capabilities of the various programs enhance both the accuracy and timeliness of document preparation.

If the back office portion of the package is purchased from the providers that offer a seamless product, the accounting system will have numerous management and security features that apply to trust accounts and accounting.

Collection and Bankruptcy

Around 10% of the claims arise from this area of practice. Accurate document production and control combined with timely performance of necessary task are critical. The efficiency and accuracy improvements provided by automation will reduce claims in this area related to documents accuracy and timeliness.

Although this is a very brief discussion of the issues surrounding practice management and office automation, I believe the answer is clear. Office automation can have a positive impact on your firm.

[Author: Paul F. Mahaffey CPCU has spent the last 35 years in the field of lawyer's professional liability working in the insurance industry with an emphasis on loss reduction and avoidance.]