Law Firms

Why the increase in malpractice risk? Lawyers for plaintiffs point to trial lawyering, bill padding

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Two lawyers who handle malpractice cases are pointing to two possible reasons why BigLaw is facing increasing malpractice risks.

In a column for Law360, Klein & Wilson partner Gerald Klein and associate Amy Nguyen said they are seeing two potential problems.

First, law firms may have fewer capable trial lawyers, they wrote.

“Because jury trials are becoming rarer, there are fewer attorneys capable of trying big cases,” they said. “Getting straight A’s at Harvard University and being editor of the law review does not mean an attorney is qualified to try a sophisticated, high-stakes case before a jury.”

Second, corporate clients are scrutinizing law firm bills for padding of hours and tasks and for charges for costs that were not incurred.

“There is nothing wrong with seeking reimbursement for telephone charges, copy costs, out-of-plan computer services, etc., if the methodology is reasonable,” they wrote. “But cost reimbursement should not create a profit center.”

Klein and Nguyen refer to a survey by insurance broker Ames & Gough. The firm polled 11 companies that provide malpractice insurance to 80% of the nation’s top 200 law firms.

According to the 2019 survey, 2018 was the first year in which a majority of insurers had a claim payout higher than $150 million. At least two settlements exceeded $250 million. Law360 had coverage; a press release is here.

According to Ames & Gough, the increase in claim severity is due to the greater complexity of matters and higher costs to defend malpractice claims.

The largest number of claims stemmed from four practice areas: business transactions (cited by 63% of insurers surveyed), trusts and estates (55%), corporate and securities (45%), and real estate (45%).

The most common alleged malpractice error concerns conflicts of interest, the survey said.

The survey also found an increase in claims among some insurers. Nearly 73% of the insurers said the number of claims filed in 2018 was either the same or higher than the previous year.

Eileen Garczynski, a senior vice president at Ames & Gough, told Law360 that the increase in claims severity “is shaking the insurance industry because many of the insurers that write legal malpractice insurance are pulling back or pulling out of the market altogether.”

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