Loss Prevention Tips
In many professional liability insurance claims against lawyers, the defendant lawyer will confess that “I knew I shouldn’t have taken this file” or “I had a bad feeling about this case”. Before you take a file, you should think about whether you have the expertise, the experience, and the time to take on a matter in an area of law (or in an area of the country) which is unfamiliar to you. It’s one thing to stretch yourself and rise to a challenge, it’s another thing to take on matters which you’re not quite competent to handle. It’s important to turn down cases when you don’t have the required time or resources to devote to them. If a case is being offered to you on a contingency fee basis, carefully consider whether you have the financial resources to carry the case. If it’s clear that you can’t adequately investigate and pursue a matter because of constraints on your time, send the potential client elsewhere as soon as possible. Clients who have unrealistic expectations, or who talk about “just wanting to make their point” or “teaching someone a lesson” can be extremely difficult. Clients who see conspiracies everywhere are seldom easy to represent. And always proceed with caution where the client has had other lawyers before you. As Insurance Department staff at one Law Society are quick to warn: “never be the third lawyer on a file”. (Excerpt from Issue #35, CLIA Loss Prevention Bulletin)
Failure to communicate effectively with clients is the common factor in a large percentage of errors or omissions claims and also in a huge number of complaints to the Law Society. Law Society discipline staff report that a significant number of the complaints they receive involve lawyers not returning phone calls or not advising the client about what is happening on the file. While failing to return a phone call may not be negligent or actionable per se, a client who feels neglected, uninformed, snubbed or ignored is far more likely to bring a claim than a client who has been consistently kept “in the loop” by his or her lawyer throughout the process.
Perhaps the simplest way to keep your client informed about what is happening on a file is to send copies of correspondence and pleadings. Some law firms make efficient use of what is essentially a form letter, generated by support staff, enclosing a copy of the most recent correspondence and inviting the client to call the lawyer if they have any questions. A low-tech but ingenious twist on that concept is the very effective use of a rubber stamp reading “Forwarded to you by ABC Firm for your information”. A client who is kept informed and up-to-date by letter, email or phone call (even, or especially when the news is bad) is less likely to sue you or to write a letter of complaint to your governing body. (Excerpt from Issue #151, CLIA Loss Prevention Bulletin)
Safe and Effective Practice, edited by Barry Vogel, QC and written by Jean Côté and others, is a loss prevention resource that has withstood the test of time. This handbook of loss prevention materials, published by the Canadian Lawyers Insurance Association and based upon materials distributed as early as the mid-1980s, remains relevant to lawyers across Canada even after all these years.
For example, the authors note five “persistent fallacies” that lawyers cling to about legal malpractice:
1. Legal negligence claims are based on a lack of knowledge or poor decision-making;
2. If I do a good job for my client, I won’t be sued;
3. Protecting myself against a client would require that I treat the client as the enemy and therefore I couldn’t properly represent their interests;
4. All legal malpractice claims involve lawyer error and I don’t make mistakes; and
5. I could never forget this matter and therefore don’t need to record all the details.
The authors explore how these beliefs fail to protect lawyers from claims and go on to detail a wide range of simple, yet effective strategies to prevent malpractice claims.
Lawyers often report a potential insurance claim on a matter they have taken on for a friend or relative. These are among the most embarrassing claims for the lawyer and among the most difficult to defend for the insurer. Be especially wary if friends or relatives approach you to act in areas of law where you don’t practice. Taking on an unfamiliar kind of legal matter requires extra time and greatly increases your chance of committing an error. If you do decide to act for friends or family members, even for free, you owe the same duty of care to them as you do to paying clients. To avoid problems, don’t talk about the file at social occasions or around the dinner table. Make these clients come to your office. Open a file. Send them letters, including an opening letter setting out the terms of your professional relationship and what you will and will not undertake for them. Include whether you will bill them and, if so, on what basis. Make clear the amount of disbursements you anticipate and who will pay for them. Report to your clients periodically, in writing, on the status of the file. If you meet with them on the matter, make notes for your file. Include notes of conversations you inadvertently have in your living room or at a hockey game. Make sure their file data makes its way into your office conflicts system and into your limitations system. Not getting paid will not relieve you of your professional responsibilities. (Excerpt from Issue #20, CLIA Loss Prevention Bulletin)
Email has become the preferred way lawyers and clients communicate – but are you documenting these communications properly? Here are some common mishaps to avoid:
- Not saving your email in your document management system or on your server. This is important not only from a document management perspective but also for backup.
- Filing messages in your email program. While it’s easy to create and use folders in your email program, others who may work on the client file may not have access to them. It also uses hard drive space and may drain network resources.
- Failing to establish and follow filing protocols. When we relied on paper, normally the filing task was delegated to staff. With electronic communication, should the lawyer delegate filing to staff?
- Failing to back up your email communication. Many “archive” email communication but this does not mean the email communication has been backed up. If there is a system failure or outage and you have not copied your message elsewhere, you may lose those email messages.
These few tips will help keep your client files organized, current and easily accessible for you and your staff.
Lawyers in all areas of practice continue to be the targets of bad cheque scams. Fraudsters retain the firm on a contrived legal matter so that they can run a counterfeit cheque or bank draft through the firm’s trust account and walk away with real money. Don’t be complacent and think you will never be fooled. These frauds are getting more sophisticated. The matters will look legitimate, the fraudsters will be very convincing and the client ID and other documents you receive will look real. The fake cheques will be printed on real cheque stock and in the past have fooled bank tellers and branch managers. There are often two or more people collaborating to make the scenario even more convincing (e.g., the lender and the debtor, the lender and the borrower, both ex-spouses, etc.). When the bad cheque or draft bounces, there will be a shortfall in the trust account. These scams may involve real estate transactions, debt collections, business loans, IP licensing disputes or spousal support payments.
Here are some Red Flags that may indicate a matter is a fraud:
-The name and/or email address is different than sender’s signature
-Client uses one or more email addresses from a free email service even when the matter is on behalf of a business entity
-Initial contact email is generically addressed, ex. “Dear Attorney”
-Email header indicates sender is not where he/she claims to be
-Client prefers email communication due to time zone differences
-Client is in a rush to have the deal done quickly
-Client is willing to pay higher than usual fees on a contingency basis
-Client instructs you to quickly wire funds to an offshore bank account based on changed or urgent circumstances
-Client is in a distant jurisdiction
-Client shows up and wants the matter completed around banking holidays.
-Cheque is drawn from the account of an entity that appears to be unrelated.
Proceed with caution if you are suspicious that a matter may not be legitimate. Make sure you understand and are comfortable with all aspects of the transaction. Dig deeper and ask questions about anything you don’t understand. Review the steps in identifying and protecting yourself against fraud found under the Insurance and Risk Management Section on the Law Society’s website under Fraud and Scams.
Attached you will also find an updated list of names associated to the various types of email scams which continue to be circulated to our members.
Access to justice is an ongoing problem across Canada and the call is out for lawyers to contribute to the solution.
The Canadian Bar Association’s Task Force on Access to Justice issued a final report, Envisioning Equal Justice. The Task Force set targets to bridge the growing gap between those who can afford legal services and those who are eligible for publically funded legal services (i.e. legal aid). One of those targets is that by 2020, all lawyers will volunteer legal services at some point in their career. Around the same time, the Action Committee on Access to Justice in Civil and Family Matters issued a report calling on lawyers to support access to justice initiatives. The Action Committee proposed that lawyers continue delivering pro bono and “low bono” (low-cost) legal services. Whether you’re new to pro bono or you’ve provided low and no cost legal services throughout your career, you need to ensure you manage risk in your pro bono files.
You have the same professional obligations to a pro bono client as you do to one who is paying your fees. And your pro bono client will likely have the same expectations of you as if you were sending out bills.
To manage your risk on a pro bono file, remember always to:
1. Make sure you are competent. Your client deserves competent legal services. If you can’t provide that, you should decline to act.
2. Get yourself up to speed. If you have limited experience in the relevant area of law, sign up for relevant continuing professional development programs. Review the relevant legislation and any texts on the subject. Talk to your colleagues who do practice in that area.
3. Check for conflicts. While some law societies have rules in place that support giving summary advice or information without extensive conflict checks, those rules don’t likely apply to pro bono representation of a client. Make sure you can act for the client without putting yourself into a conflict.
4. Open a file. This may seem obvious, but the point is, treat your pro bono files like every other file. Follow the same internal procedures.
5. Use a retainer letter. Confirm the scope of the work you will do. Confirm your expectations of the client and set out what the client can expect from you. Managing expectations is essential to the success of the pro bono relationship.
6. Communicate. Clear and effective communication is essential with every client. Don’t take shortcuts in this area.
7. Use checklists. Checklists are always a good idea, but particularly so if you may be stepping into a practice area in which you’re not experienced.
8. Diarize and follow-up. Calendar limitation dates, deadlines and bring forward dates as you would for any other file.
9. Keep time records. You’re not sending out bills and you’re not getting paid, but you still should keep time records. This will assist you in keeping the right balance between your obligations on pro bono and fee-paying matters.
10. Report on closing. Like a retainer letter, a closing report is always a good idea. It confirms what you have and have not done for a client. A closing letter can be a particularly useful communication tool in the absence of an itemized statement of account.
In other words, treat your pro bono files with the same care as you would your paid files. Your clients deserve no less. (Excerpt from Issue #59, CLIA Loss Prevention Bulletin)
From a claims prevention point of view you get more for your risk management efforts by focusing on improving client communications and by getting things done on time. Below are a few tips for avoiding an insurance claim.
1. Begin with a written retainer agreement. The retainer document should clearly identify who the client is, what the terms of your engagement are, what you are retained to do and the agreed payment arrangements.
2. Control your client’s expectations at all times. Clearly and accurately communicate in writing to your client the available courses of action and possible outcomes, all implications of any decisions, how long things will take, and the expected fees and disbursements involved.
3. Document, Document, Document. You might document as much as you can in some contemporaneous manner. Letters are fine, but e-mails, detailed time entries, and marginal notes on documents can be equally effective. In particular, you want to record advice or instructions that involve significant issues or outcomes, and major client instructions or decisions. Memorialized communications help confirm what was said or done for the client should you ever need to look back to explain why or what work was done, to justify an account, or to defend yourself in an insurance claim. Always keep in mind that claims can arise long after the work is completed.
4. Set your deadlines well in advance. Set realistic deadlines for completing tasks and delivering things to clients. Don’t leave things to the very last minute, as unexpected events beyond your control can prevent things from happening as required. Giving yourself an extra week or two by setting your deadline before the real deadline can be a lifesaver.
5. Don’t do any of the things that most annoy clients. This includes all the things that would annoy you, too—failing to return calls or e-mails, long periods of inactivity, and surprising a client with bad news or a large account.
6. Don’t handle a matter with which you are uncomfortable. If you are unsure about handling a matter for any reason—you’re unfamiliar with the area of law, a potential conflict exists, it’s a matter for a relative or friend, or a demanding or difficult client—get appropriate help by availing of the Mentoring Program or refer it to another lawyer.
7. Send interim and final reporting letters. The letters should confirm what work was done, and the successes obtained for the client.
8. Think before suing for fees. This almost guarantees a counterclaim alleging negligence.
9. Document, Document, Document. Read tip number 3 again. It is the best way to avoid a claim.
None of us like to think about disasters, and perhaps we even have an “it won’t happen to me” attitude. Regardless of the size of your firm, you might want to consider implementing a plan which will assist you, or anyone in your office, if there were an unexpected business interruption affecting you, your staff or your firm.
This short quiz will help you determine your ability to survive some common “disaster” scenarios and provide you with the basis for a Business Interruption Plan.
- If all of the computers in your office were stolen over the weekend, do you have all the serial numbers of the equipment, the original cost of the equipment, the value of the equipment, and the ability to recreate all of the data on the computers?
- If your office was completely destroyed by fire, how long would it take you to contact all of your clients, recreate all your computer data, contact your insurance company, process invoices, contact opposing counsel and generally get your practice operational again? Who would be responsible for performing each of these functions?
- If you had a heart attack tonight, are your files organized so that someone could pick up your caseload without your clients suffering any disadvantage?
- If you could suddenly not come into the office on Monday, have you designated the person who could pick up your caseload? Even if you have a partner, how much does he/she really know about your caseload?
- If you were unable to come into the office for a few days or weeks, could anyone actually find anything on your desk or in your files? Does the answer change if your assistant was off sick or away on vacation at the same time?
- If your secretary/legal assistant/bookkeeper suddenly quit, do you know their filing systems so that you can find information in their desks, in their (or your) files, or on their computers? Do you have copies or know where they keep the keys for filing cabinets, etc.? Do you know all their respective passwords (including voice mail, computer login, e-mail, the accounting package and any other software applications they use)?
- If one of your staff members disappeared with client trust funds, would you have sufficient records to determine what was taken and when?
- If you have a partner/associate who was suddenly disabled, do you or someone in your office know his/her schedule for the next three months? Do you or someone in your office know the status of all matters in your office?
- If you or a partner in your firm were disabled for an extended period of time, will you be able to draw a salary? If so, how much and for how long? If you are a sole practitioner, how will expenses of the firm be paid while you are out?
- If you were to die or be completely unable to return to work, what would your desk, client files, and office organization say about you to anyone who would have to step in to assume responsibility? What burdens would this place on your partners and spouse? Is this the way you want to be remembered?
(Excerpt from “Managing Practice Interruptions”, LawPro)
A lawyer represented a busy salesman on several commercial matters including some litigation files. During meetings to discuss his commercial files, the client mentioned he’d been involved in a car accident and complained about the trouble he was having getting his insurer to pay for the damage to his car.
The client recalled that he may have asked the lawyer to call the insurer to flush things out and that, before the limitation date expired, he showed the lawyer some documents indicating that the insurer would not acknowledge the client’s claim.
The lawyer, on the other hand, recalled that although they did discuss the insurance problem generally, she was given no details. She said the client formally retained her to resolve the claim against his insurer five days after the limitation date expired. Only then did she open a file and receive documents.
In fact, the client thought he had retained the lawyer to help on his insurance matter a full two months before the lawyer thought she was hired.
The moral? If your multiple-file client casually brings up a new matter, be alert. Clarify whether or not you are retained on that new matter. Then memo the file. (Excerpt from Issue #20, CLIA Loss Prevention Bulletin)
When you file a lawsuit, beating the statute of limitations is not your only concern. You must also ensure that you’ve named the proper defendant. Malpractice claims arising out of failure to name the proper party are common. Here are two illustrations:
1. Lawyer asks associate to draft a claim for client, who was in an automobile accident. The police report says the driver of the other vehicle was Mr. X, so associate names Mr. X as defendant. Just before the limitation runs out, lawyer files the statement of claim. Mr. X gets the claim against him dismissed, because his son was actually the driver. By now the limitation has passed, and lawyer is barred from suing the correct defendant.
2. Client slips and falls at convenience store. Lawyer reviews convenience store’s business licence, which is issued to PDQ Corp. Three weeks before the limitation date, lawyer files suit against PDQ Corp., which files bankruptcy, causing a stay of the personal injury action. Long after the limitation date passes, the stay is lifted and discovery begins. In response to a question, it is learned that someone other than PDQ Corp. was the occupier.
In each situation, lawyer relied on a single source to identify the defendant: a police report, a registrar, a business licence. A more complete investigation would have disclosed the proper defendant. What’s more, lawyer waited until the last minute to file the lawsuits and lost any opportunity to correct mistakes. To reduce the likelihood of malpractice claims from naming the wrong party, take these precautions:
Before filing the lawsuit, investigate thoroughly
Police reports, medical reports, and such documents can contain incorrect information. Insurance companies may name the policy owner rather than the alleged wrongdoer on their correspondence to you. Your client may not remember the name of the wrongdoer. Talk to witnesses. Research public records. If a corporation is involved, find out when it was formed and if it remains active.
File the lawsuit early
Give yourself enough time to correct a mistake if one is made. Filing early lets you conduct discovery to make sure you have named the correct party.
Stay alert to clues that you have named the wrong party
Pay attention to the defendant’s statement of defence; if you’ve named the wrong party, it will contain key denials that signal your error. Clues about mistaken identity will also be found in answers to interrogatories and deposition questions. Make sure you are not so caught up in prosecuting the case that you fail to pick up on these clues and take appropriate action.(Excerpt from Issue #124 CLIA Loss Prevention Bulletin)
The Lawyers’ Insurance Programme is seeing an increase in spear phishing email frauds targeting lawyers and law firms. The spear phishing messages we are seeing are very sophisticated. The messages are intended to trick the recipient into making a payment or transferring funds to someone outside the firm.
A sample of the latest communications we have received on a phishing attempt appears below. In this case, the email appeared to come from a member in their capacity as President of an Organization, with their correct address showing in the “From:” line, but all replies were actually going to an address firstname.lastname@example.org
From: Member in a capacity as a President of an Organization
Sent: June-08-17 6:29 PM
To: Another Member in capacity as a Treasurer of an Organization
Subject: *Quick Update’s*
How are you?
We have a payment that needs to be made, i need you to arrange a transfer of $7,900.00 to a vendor today.
kindly confirm to me if you can get this done, so i can send you the vendor/consultant details. E-mail me for questions
You can learn more about spear phishing attacks in the attached LAWPRO Magazine article Dont take the bait on a spear phishing attack .
Lawyers who retire but continue to hang around the office can pose a liability risk both to themselves and to their old firms. As the baby boom generation hits retirement age, more lawyers will find it attractive to keep an office at their old firm, so they can continue to mingle with former clients and fellow lawyers. But consider the prospect of a former client mistaking some friendly chat as advice about her legal situation and acting on it to her detriment. If she sues, the retired lawyer who will have no malpractice insurance may have to pay his own legal bill, which could wipe out years of hard-won earnings. The bottom line is that lawyers who are not insured must not dabble in law. (Excerpt from Issue #20, CLIA Loss Prevention Bulletin)
There is no doubt that technology has increased the pace of practicing law. While increasing efficiency, the constant flow of new products and applications can create just as much anxiety. The key is to use technology – don’t let it use you.
Here are a few examples of how technology has complicated legal practice, and what you can do to cope:
– Unlimited accessibility: limit email and cell phone use. Thanks to emails and cell phones you are now more accessible than ever. During working hours, productivity may suffer because emails constantly interrupt workflow. Clients expect you to stop everything and reply or call back on-demand. Take control of how and when you check your email and cell phone. Turn off automatic notification when emails come in. Turn off the phone or put it on silent during working hours. Clearly state in your cell phone mailbox that you only respond immediately to urgent matters. When you go on vacation, put your phone away and don’t access the internet. If you must, limit your access to once a day.
– Information overload: organize and execute: Every lawyer is familiar with the barrage of emails that come in through the day. Only some are urgent tasks. Use this tip from Stephen R. Covey’s The 7 Habits of Highly Effective People: Break up your task list into four kinds of tasks: (1) urgent and important, (2) urgent and not important, (3) not urgent and important, and (4) not urgent and not important. Use practice management software to keep track of the daily task list, or keep a running list on a notepad. Organize your tasks into manageable chunks and execute the ones with highest urgency and importance first.
– Adapting to new technology: train up. Like any tool, technology is only useful when you learn how to use it effectively. Whether you are installing a new application, going paperless, or using a new telephone system, learning new technology is stressful. Mastering technology takes time and energy. Train up by taking (often free) online tutorials, attending bar association tech shows, and tuning into appmakers’ blogs. Ensure your staff are trained properly, too.
– Communication isolation: step out of the office. You can find yourself isolated if you spend more and more time communicating with others through digital media. Emotions are rarely communicated well by email and telephone. Skype does not replace the human need for face to face contact. Schedule lunches and coffees with colleagues, clients, and mentors. Place yourself into situations that force you to engage with people face to face.
– Keeping up with the Joneses: stay focused on yourself. Facebook, LinkedIn, Twitter, and other social networking sites have made it easier than ever to see what your friends and peers are up to. People tend to present themselves in the best possible light. It is tempting to want to keep up with the Joneses even if this causes you stress and embarrassment. The face presented in social media does not necessarily reflect reality. Stay focused on what you need to do. The rest will take care of itself. (Excerpt of September 2015 Edition of LawPro Magazine)
Almost everyone has data in the cloud, although many people may not realize it. If you are using Gmail or another free email service, iTunes, Facebook, LinkedIn or other social media tools, Dropbox, or doing online banking, your data is in the cloud. The “cloud” is the very large number of computers that are all connected and sharing information with each other across the Internet. If you create or post information that ends up outside your office, you are most likely in the cloud.
Cloud computing offers many benefits to lawyers. There is a vast selection of services, software and applications that can assist with just about every task in a modern law office, in many cases allowing those tasks to be accomplished more efficiently and quickly. Many of these services permit remote access, thereby allowing lawyers and staff to work from anywhere with full access to all documents and information for a matter. Using these services is usually economical as they can significantly reduce hardware and software maintenance costs and capital outlays. Storing data with suitable cloud service providers will likely mean that it is more secure and better backed up than it might be in a typical law office.
However, placing your client or firm data in the hands of third parties raises issues of security, privacy, regulatory compliance, and risk management, among others. Firms should have a process in place to ensure due diligence is performed and all risks and benefits are considered before any firm data is moved to the cloud. The evolving standard from U.S. ethics rules and opinions seems to be that lawyers must make reasonable efforts to ensure any data they place in the cloud is reasonably secure. Contracts with any third party that is in possession of confidential client information should deal with relevant security and ethical issues, including having specific provisions that require all information is properly stored and secured to prevent inappropriate access.
When considering your options, keep in mind that a cloud product or service designed for lawyers may have been developed with the professional, ethical and privacy requirements of lawyers in mind. (December 2013 Issue of LawPro Magazine)
A well-written fee agreement encompasses more than your hourly, flat or contingent fee; it should define the parameters of the work to be completed, and address your obligations to the client, and the client’s obligations to you. It should also address your rights (e.g., to seek withdrawal) and your client’s rights (e.g., to terminate representation). Be clear in the language you choose.
Avoid legalese. Use common language that is clear to your clients. Remember, because you are the person drafting this document, it is possible that any error or ambiguity may be resolved against you if a fee dispute later arises.
A comprehensive written fee agreement should address the following issues:
Define the scope of your services: Be specific about the legal matter on which you are representing the client. You should stipulate the exact nature of the relationship, what role you are taking, what functions you are to perform, and what your ongoing role and responsibilities will be. This is particularly important in the case of a limited retainer.
Define the timing of your services: Make your services contingent on cooperation and payment from the client. If you want payment before commencing work, clearly state that your services start after the client has paid the advance or the flat fee. State that your services may cease if the client fails or ceases to pay your bill.
Explain the fee arrangement: For your client’s edification, explain the type of fee arrangement you are using. If it is a flat fee, expressly state that your fee is a one-time, up-front payment before services begin. For an advance fee, explain in the agreement that you will be charging your services against the advance fee on an hourly basis, and write in that hourly amount. Let the client know that when the advance fee is exhausted, you will cease to work on the file immediately, and you will require more money within a set period of time, failing which you will withdraw from the file.
State examples of the services to be billed to the client: For your clients who are billed on an hourly rate basis, explain that they will be billed for your time on all aspects of the case, and cite several types of billable services, such as examinations for discovery, telephone calls, drafting correspondence, pleadings, trial preparation, etc. State the amount of your minimum time increment: one-tenth of an hour, one-quarter of an hour, etc. Clients will appreciate knowing these details in advance, and such disclosure will save you numerous headaches over time.
Explain the client’s obligation for costs: There are two types of costs usually billed to the client: Costs incurred in your office, such as copying charges, postage fees, long-distance telephone charges, etc., and costs billed by outside vendors, such as court filing fees, messenger services, and process fees. Some lawyers pay all costs and pass them along in their bills to the clients. Other lawyers charge clients for the in-office costs, and have the clients directly pay the costs incurred by outside entities. Still other lawyers require funds in advance from clients to pay for costs incurred during the course of the matter. Decide how you want to bill your client for costs and so state in the agreement.
Explain your billing practices: Let your client know how often he or she can expect to receive your bill (preferably monthly), then make sure you stick to the promised schedule. Also explain when payment is due (upon receipt; within 30 days, etc.).
Allow your client time to question your bill: Discussing your bill with your client will ease client concerns when the bills start to mount. Let your client know in the fee agreement that he or she may discuss the bill with you at any time. (Excerpted from Managing the Finances of Your Practice Booklet by the Lawyers` Professional Indemnity Company)
From an insurance risk and management perspective, we cannot express often enough the importance of effective communication. We remind lawyers about the importance of properly documenting their files and to provide clear instruction to their associates and support staff when delegating work.
But what can you do to ensure you understand the instruction you have received from a supervising lawyer in your firm and avoid unnecessary mistakes?
Here is a list of questions you can use to make sure you receive clear direction before tackling an assignment:
- How does this assignment fit into the matter we are working on?
- What should the end product look like?
- How much time do you expect me to spend on it?
- Is this a priority?
- When should it be completed by?
- Where else can I get information or other help? Do you have a precedent or template I can work from?
- Who is responsible for decisions and liaising with the client?
- When would you like me to provide a status report to you?
- Summarize what you intend to do. “To make sure I understand correctly…”
Taking the time to be proactive will save you time correcting mistakes later on, help avoid a possible claim, and allow the supervising lawyer to know that they have picked the right person for the job!
Ransomware attacks continue to affect many lawyers across the country. Ransomware attacks are a form of “digital blackmail” that:
“…will systematically scramble the files on the victim’s computer, locking them with a digital key to which only the criminal has access. Victims are then unable to read the files, which could potentially cripple a business, especially if the data is critical to its operation. Once in the snare of the criminal, the victim must make a payment to receive the key, causing the ransomware to automatically unlock the files.”
The blog post Ransomware Attacks Stymie Law Firms includes some tips on how to avoid becoming a victim of a ransomware attack as well as an Interactive Quiz to test your vulnerability. (Excerpt from CLIA Loss Prevention E-Byte, June 2017)
There are three typical scenarios that lead to conflicts claims: failure to screen for conflicts; failure to recognize conflicts despite screening; and fooling oneself into acting, despite a conflict. All three scenarios have the same potential to lead to a claim against the lawyer.
To avoid a Conflict of Interest Claim, follow these simple steps:
- When speaking with a new or potential client, record the names of all parties (both individuals and corporate parties) correctly.
- Take a moment to reflect on who, exactly, is your client. Is an individual giving you instructions on behalf of a corporation? On behalf of corporate directors? On behalf of a shareholder or shareholders of the corporation, rather than the corporation itself? Is the owner of a shared family business hiring you on her own behalf only, or on behalf of all the owners? If a couple is giving you instructions together, are you certain that their interests do not diverge? Pay attention to your instincts. Do not act until you are clear who the client is, and that there is no conflict.
- Once you fully understand who is retaining you, follow the conflict-checking procedures in place at your firm.
- If your instincts (or your systems) suggest that there may be a problem, review the situation with a trusted colleague. You may not be able to objectively assess your own conflicts.
- If a conflict emerges or comes to light after you have begun working on a matter, immediately disclose the conflict and take steps to resolve it. If you need to remove yourself from a matter, do so promptly to avoid any prejudice to the client’s interests.
Finally, be alert to activities, on the part of potential clients, that may be designed to create “tactical” conflicts. For example, some clients, particularly in communities with a limited number of lawyers, have been known to contact multiple lawyers in an attempt to make it difficult for opponents to find counsel who are free of conflicts. One way to avoid being the target of these tactics is to instruct anyone who answers the phone to use a screening form designed to collect sufficient information to identify existing conflicts, while avoiding the collection of confidential information that would create a new conflict. Where a potential client does not retain the lawyer after making this kind of contact, it can be useful to send a non-retainer letter to make it clear that no solicitor-client relationship was created. (Excerpt from LawPro, June 2013)
In recent months, our members have been targeted (and almost caught) in the following two types of fraudulent scams.
Equipment/Inventory Purchase Fraud: In equipment/inventory purchase fraud scams, a lawyer is retained to act on the purchase of a large piece of commercial equipment. The fraudster will provide documentation about the equipment, or whatever else is involved in the transaction.
The lawyer will be asked to deposit a cheque into the lawyer’s trust account and to wire the balance (after fees are deducted) to an overseas account. Of course, the cheque is fraudulent and the lawyer will be left with a shortfall in the trust account.
In this type of scam, the fraudsters will often use the details of a real company, including web address, names of real employees and the mailing address. The contact phone number and email, however, will be fake.
Business Loan Fraud: In business loan fraud scams, a lawyer is contacted to help an out of Province creditor collect on a business debt from a purported debtor in the lawyer’s jurisdiction. The fraudster will provide documentation about the loan.
When the lawyer has sent a demand letter (or sometimes, before a letter has even been sent) a cheque will arrive. The lawyer will be asked to deposit the cheque in the trust account and wire the balance (after fees are deducted) to an overseas account. Of course, the cheque is fraudulent and the lawyer will be left with a shortfall in the trust account.
How to Handle a Real or Suspected Fraud
If you are acting on a matter that you suspect might be a fraud, or if you have been targeted by any of these frauds please forward any of the emails and supporting documents that you have received to email@example.com. We will talk you through the common fraud scenarios we are seeing and help you spot red flags that may indicate you are being duped. This will help you ask appropriate questions of your client to determine if the matter is legitimate or not. If the matter you are acting on turns out to be a fraud, we will work with you to prevent the fraud and minimize potential claims costs. We will also post this information on the Law Society’s Website and send warnings to practicing members. We do not disclose the names of firms that have provided us with information.
What can you do to help put a stop to the fraud attempt?
You can simply stop replying to the fraudster’s emails or inform them that you suspect fraud and will not act on the matter. If you have a fraudulent cheque you can destroy it or send it to the fraud department of the financial institution it is drawn upon. You can also report the fraud to the Canadian Anti-Fraud Centre or report the fraud attempt to the police.
What if the fraud has been successful?
If you have been successfully duped, please immediately notify the Lawyers’ Insurance Programme as there may be a claim against you.
Fraud Prevention Information
Identifying Fraud, some tips to consider to protect yourself against fraud and a list of names associated to the various types of email scams which continue to be circulated to our members locally can be found on the Law Society’s website under the Insurance and Risk Management section.
Law societies across Canada have noticed an uptick in banking fraud activities as a result of more relaxed banking methods. With mobile banking, for example, a cheque deposited by photograph or scan remains physically in the hands of the depositor who can then go to a bank and deposit it again, perhaps to a different account, or request cash. For this reason, members should implement careful controls to ensure cheques issued by the firm have not been altered or negotiated more than once and have controls on deposits by staff and, if electronic deposits, should have rules about the circumstances under which such deposits are permitted – if at all permitted – and about deposit receipts and cheque retention.
Below you will first find a Summary of Noted Problem Areas as determined from the experiences of law societies across Canada. Not all of these problem areas are related to mobile or electronic banking. After that, you will find some Suggestions for Safeguards against problem areas.
Summary of Noted Problem Areas
- cheques altered after printing and issuing. In these instances the name of the payee is whited-out or the amount to be paid is whited-out in favour of another person or amount. In a variation on these alterations, the cheque number at the top of the cheque can be whited-out and altered and the bank coding at the bottom can be and altered and thereby create a new cheque in the bank’s system
- cheques entered on the firm’s accounting system with information that is different from the information on the face of the cheque; these changes can be made before the cheque even leaves the firm
- emails containing emailed funds can be received by anybody and deposited in any bank account
Most of the problems noted above have not been discovered by the banks. Instead, it is the issuer of the cheques who usually makes the discovery during reconciliation or when examining cheques returned by the bank. Banks will not necessarily take responsibility for errors or frauds of the types mentioned, or if they do, then their responsibility may be time-limited. Because the bank may resist liability, you should consider speaking to your bank about its policy regarding these problems.
Suggestions for Safeguards
- ensure that all bank reconciliations, both general and trust, are completed in a timely manner
- ensure that all errors noted are followed up immediately, the error found, and the correction made
- a lawyer should examine all general and trust cheques and cancelled cheque copies to ensure that all pages are present with the bank statement, that all transactions are reasonable with regard to the payee and the amounts paid, and there are no alterations to the cheques
- ask your bank about the appropriate procedure to void a cheque once it has been deposited electronically to your account. The objective here is to prevent the electronic cheque from being deposited twice, being altered, or ending up in the wrong hands.
Confirming the filing deadline as soon as you open your file, properly diarizing the date, as well as filing the Statement of Claim well in advance of the limitation date can help avoid a claim being filed against you.
But here are some of the “dangers” you should be aware of in your practice that can lead to a limitation period slipping between the cracks:
• staff departures or arrivals
• transfer of files between lawyers at the firm
• firm mergers
• lawyer or staff absence
• taking on more than you can handle
Paying particular attention to the firm’s systems during these times can help you avoid missing a limitation period and a claim for negligence filed against you.
Homewood Health, your Professional Assistance Provider, is pleased to release the September 2018 edition of their Life Lines newsletter, “Addiction & Recovery.” This newsletter looks at what an addiction is, what treatment options are available for various addiction severities, and how to support someone with an addiction.
This newsletter is intended to support health and wellness by providing our members, their family members and their employees with useful information and tips. You may find other editions of the newsletter on the Insurance and Risk Management section of the Law Society’s Website at http://www.lawsociety.nf.ca/lawyers/insurance/resources/
The practice of law is laden with risk. The difficult problem that lawyers face is what they can do to reduce risk without devoting so much time to risk management that it interferes with the practice of law. The Lawyers’ Insurance Programme has developed a Loss Prevention Self-Assessment Checklist that members can use to identify particular risks that may have developed in their practices. Once those risks are identified, members can then take steps to eliminate or reduce risky practices.
This Checklist has been developed with a particular focus on addressing the following top three causes of insurance loss, which together represents 95% of insurance claims:
1. Systems/Procedures/Administration: missed deadlines (ex. limitations), poor office procedures and time management errors (51%)
2. Communication: Failure to follow client’s instructions, poor communication with client/others (33%)
3. Law: Failure to know and properly apply the law (11%)
Completion of the Self-Assessment Checklist will qualify for a one hour credit towards the Mandatory Continuing Legal Education activity for 2018.
Suing a client to collect an unpaid account almost guarantees you will face a counter-suit alleging negligence. In most cases that allegation of negligence will be completely unfounded, but it still will trigger a duty to report a claim to the Lawyers’ Insurance Programme.
Here are some suggestions to avoid suing for unpaid fees:
- Screen potential clients wisely. Make sure they can afford your services.
- Be clear about fees and costs at the outset.
- Use written engagement letters to avoid misunderstandings and tell the client what will happen if fees aren’t paid.
- Implement a billing cycle and stick to it. Deal with delinquent accounts consistently and quickly.
- Send clients copies of letters, pleadings and significant documents so they see what you are doing.
- Weigh the risks and benefits of suing. Consider how much time a lawsuit will take, the odds of success and whether your time might not be better spent working with good clients on good cases.
Remember that communication is key. Keeping a client informed about the current status of their case will allow the client to understand the work that was performed and why the work was necessary. An informed and happy client is more likely to pay their invoice.
Lawpro (Law Society of Ontario Insurers) recently published the following article that we believe beneficial to send to our insured members.
New and exciting opportunities – and claims risks: Marijuana law
As recreational marijuana makes its way onto Ontario store shelves, lawyers are gearing up for the new market. From producers to retailers, and everything in between – retail stores, physicians, banks, transportation companies, accountants, you name it – clients will come from all segments of industry. Here we take a look at some of the opportunities and give some tips to minimize claims risks.
New producers, distributors, and retailers may seek advice from corporate lawyers to establish their businesses. This can include incorporation, drafting and negotiating contracts such as equipment purchases, and keeping up with reporting requirements. While many tasks will fall into ordinary “bread and butter” legal work, we note that inadequate investigation has been a growing area of malpractice claims. Investigation can range from corporate searches to asking all the relevant questions in a client interview. Using one practice area example: what might be unique about acting for the landlord or tenant with respect to a pot dispensary lease? Are there additional risks associated with mould, fire hazards or the need for increased security that may impact insurance eligibility or availability? How might these sorts of considerations be addressed in an offer to lease?
Even in a limited scope representation, where a lawyer is approached to complete a small legal task such as drafting an article of amendment or giving summary advice on the wisdom of incorporating, it remains important to fully draw out the facts from the client. As always, document all meetings and what was discussed, along with recommendations and instructions.
While most clients may be well-intentioned, reports in the media are already stating that the demand for recreational marijuana may not be fully met by legal providers, leaving a black market to fill in the gap. Remember that under the Rules of Professional Conduct, lawyers must not “knowingly assist in or encourage any dishonesty, fraud, crime, or illegal conduct.” Corporate lawyers should, as with any incorporation, inquire as to the purpose of incorporation and stay on the right side of the law. Omitting to ask probing questions – purpose, place, people involved, and so on – can put a lawyer at risk if the client is involved in illegal conduct. Don’t become an unwitting tool for mischief. Alternatively, you may have a client who in good faith adamantly believes that the law now allows for something it simply does not. Since this is an emerging area of law, you cannot rely on well-read clients to know the law better than you do, or you both may pay the price.
Given the market opportunity, the temptation may arise to go beyond your practice area and service a client in need. But we caution against this – don’t dabble. While we give this advice generally to all lawyers, this is doubly important in marijuana law. Like a fish out of water, a lawyer dabbling in an area may run afoul of the law in any uncharted practice area, particularly marijuana law. The changing legal landscape, new as it is, may contain traps even for the experienced practitioner, let alone the dabbler. What are the tax implications of a certain course of action? What are the record-keeping requirements? Licensing requirements? Reporting requirements? Myriad obligations can arise from various governing legislation, and the dabbler is at risk of missing these. While expanding your market is good business, so is staying within your capabilities.
With new businesses finding new partners, real estate and corporate lawyers may also find that the fruits of their investigations into their business clients may be relied upon by others. Could a bank require a lawyer to sign off on the legal status of a cannabis producer or distributor? Anti-laundering laws may be onerous. Could a landlord or lender require a lawyer to state that a property is being used legally, or that required licences and permits have been obtained? To the extent the law may require, lawyers should be cognizant of their duties to clients and, if any, to regulators and third parties where relevant.
Lawyers may find that legalizing marijuana is having an impact on them, even if they don’t intend to act on client matters directly linked to it. As recreational drug use may increase, workplaces may be affected when employees take part. Employers, including law firms, may need to determine when the duty to accommodate is triggered, which typically applies to medically prescribed drugs. Ethical or moral judgments seem to be changing with the times, and the law will likely evolve with them. What policies should law firms have? What should employers and employees do in terms of reporting and disclosure? Could this impact a law firm’s health benefits program?
Enterprising lawyers wishing to trumpet their successes in this new practice area on social media may wish to be careful. The duty of confidentiality prevails, and advertising a client’s success on a blog or Twitter may end up backfiring if the client can be identified and does not wish to be. Permission to broadcast success about a client can in some cases be easily obtained, and it is wise to have such consent documented. Legal advice on a blog should also be limited. “Ghost clients” may end up haunting the lawyer should legal advice be provided on social media, however fleeting. A Snapchat may disappear after 30 seconds, but the screenshot does not, and neither, necessarily, does a cached tweet or blog post.
Undoubtedly clients will enter the market and require legal work. Taking advantage of the opportunity, lawyers should ensure clients are kept abreast of the law where relevant, and that costs, timelines, possible outcomes and risks involved are discussed and documented. The changes in marijuana law may well affect lawyers across the board, from law firm management to client management. Keep up good practice habits, avoid dabbling, and stay abreast of new developments. (PracticePro Avoid a Claim Blog, Posted: 17 Oct 2018 11:38 AM PDT)
Malpractice claims in Wills & Estates practice have increased steadily over the last decade.
Communications issues (often at the time the will is drafted) are the biggest source of these claims. Too many lawyers are not truly listening to the client’s instructions and not probing and questioning the client to uncover facts that may cause problems later. It’s important to read between the lines instead of simply filling in the elements of a will template or precedent.
Wills and estates is an extraordinarily complex area. Lawyers who practice in this area must maintain a working familiarity with a wide range of statutes and may need to apply complex provisions of the Income Tax Act. Law-related errors are more than twice as likely to occur in the wills and estates area as compared to other areas of practice.
Ensuring you understand the client’s needs, knowing the relevant law and avoiding shortcuts can help prevent claims. Detailed documentation of your conversations with, and instructions from, the client can support a lawyer’s defence should a claim be made.
One of the most frequent questions lawyers ask us is “How long do I have to keep my closed files?”
Certainly you don’t have to keep all files permanently – this just doesn’t make practical or economic sense. Nor is the solution as simple as a one-size-fits-all rule for when to destroy closed files.
There are a number of reasons to keep your closed files. Some reasons benefit your client, others benefit you. One key reason is that your file will help you defend yourself against allegations of malpractice. A well-documented file is often the best defence, especially if it contains evidence of the work done on a matter. Sometimes there will be no other source for that information. On many malpractice claims the lawyer and client will disagree or have different recollections about what was said or done – or not said or done.
Consider the consequences of having no file available in the event of an insurance claim:
-A reduced ability to defend the claim, as there is no evidence to establish what work was done on the matter;
-A reputational risk to the lawyer, who may have to appear in open court to defend the claim without a file;
-The increased risk of having to pay the deductible depending on the outcome of the claim;
-An increased risk of exposure outside of policy coverage and above policy limits for the lawyer.
Developing a formal File Retention Policy can provide direction to firm members on what the firm’s standard file retention period is and help lawyers identify the files that should be kept for a longer period of time.
Credibility is a critical factor for defending malpractice claims and we find claims are difficult to defend successfully if the lawyer has not made efforts to include written or electronic correspondence, notes on personal or phone conversations and other documentation in the file. When it comes down to credibility, judges often prefer clients with specific memories over lawyers with limited or general memories. This is why the information in a closed file becomes so important and why you should not underestimate the importance of a well-documented file.
For these reasons, we encourage members to ensure that files are well documented and handled in accordance with appropriate file closure, retention and destruction procedures. The Law Society issued a Practice Advisory concerning this topic which can be found on our website at http://www.lawsociety.nf.ca/wp-content/uploads/2012/11/Practice-Advisory.pdf
One of the most important things a lawyer can do to avoid an insurance claim is to document client files properly. Without documentation, errors or misunderstandings can occur that give rise to a claim.
Claims statistics for your Lawyers’ Insurance Programme indicate that poor communication with clients and others, failure to confirm or follow written instructions, and disputed instructions, are causes of negligence claims in all areas of law. To avoid such claims, you must constantly strive to ensure that what you have said and what the client has understood are one and the same thing. Developing the necessary discipline to document your files properly will make it possible for you to avoid being the subject of this type of a claim. Here are a few tips:
1. As the Lawyers’ Insurance Programme has stated many times, begin your file with a written retainer agreement. Clearly and accurately communicating in writing with a retainer agreement will help control your client’s expectations. The retainer document should identify who the client is, what the terms of your engagement are, what you are retained to do, and the agreed payment arrangements.
2. Every communication, meeting, telephone conversation and telephone message received or left should ideally be recorded in a note to the file. Notes should also be made when you are giving instructions to your office staff or making decisions without access to the complete file; you may otherwise forget specific instructions or other important information from a client or about the file.
3. Written notes regarding oral communications may help reduce misunderstandings and the lawyer will be in a position to defend with certainty and conviction if a claim arises. Ideally, the author should be identified. The note should be dated with the time and year indicated. The note should be legible. The note should be comprehensible to others. A note to file should be understandable in 3, 5, 7, or more years from writing. The note should indicate the duration of the meeting or conversation and the presence of any other person. The note should state the material facts, the advice given and/or what must be done and within what deadline. Make sure that all your staff (receptionists, assistants, junior lawyers, articling students, and so on) document the file in the same way.
4. You should not rely on your memory or the belief that you have confidence in the client. Furthermore, it is highly possible that even an informed client will swear with certainty, and without being dishonest, that they do not remember a given conversation, that they did not understand the conversation, or that they remember something completely different from what the lawyer remembers about the conversation or conduct of the case.
5. For the sake of the client and that of the lawyer, the file should therefore provide a complete picture of what took place. It is possible that the lawyer will not be the only one to work on the case. Clear and precise notes will allow someone else to continue to work on the file, even in the lawyer’s absence.
It is surprising the number of insurance claims that are essentially based on a question of credibility regarding what was allegedly said by the lawyer or by the client. Misunderstandings between lawyers and clients, poor management of a client’s expectations and poor communication by the lawyer can generate a perception in the client’s mind that their case has not received the required attention and that the lawyer has committed an error.
Keep in mind that claims can arise long after the work is completed. From a professional liability viewpoint, following these loss prevention tips might have a major and beneficial impact when defending a negligence claim.
SCREEN YOUR CLIENTS AND CASES.
One of the most effective ways to avoid an insurance claim is to carefully evaluate the potential client before you take the case.
ASK THESE QUESTIONS FIRST:
• Do you have a potential conflict of interest?
• Do you have the expertise to handle the matter?
• Is the case worth taking? Can you afford to take the case? Can the client pay?
• Does your current caseload allow you enough time to handle the case?
• Can you meet any impending deadlines?
• Could the case create case law that might adversely affect existing clients?
Insurance claims often result from a lawyer-client personality conflict or from an overly demanding or overly emotional client. You will need to rely more on intuition than logic in this phase of screening. Recognize which personality types you can’t handle and avoid them. Develop and then use criteria for evaluating cases and clients.
WARNING SIGNS INCLUDE:
• A case that has been declined by another lawyer
• A client who changes lawyers frequently or in the middle of a case
• A client with a history of lawsuits – you may be next
• A client concerned only with the “principle of the matter”
• A dishonest client
• A client shopping fees or only concerned with the price
• A client wanting to do too much of the work to save money
• A client who “knows the law” and wants to run the case
• A client who will not listen to your advice
• A “gut feeling” not to accept the case
Stop…before accepting a case, remember that every client could file an insurance claim against you. When in doubt, decline the case! In the long run, an insurance claim can cost you more than a lost fee.
(Excerpt from Issue #60, CLIA Loss Prevention Bulletin)