Law firms need to reapply for legal malpractice insurance every year. And on every application, whether it be for new business or a renewal policy, the law firm must answer questions about its client billings. Typical questions are:
•How many times have you sued a client for fees in the past 5 years?
•What percentage of your billings are over 90 days past due?
•What practices have you implemented to avoid suing your clients for fees?
Insurance companies ask questions about fee disputes because claims statistics reveal that law firms that sue their clients for fees are more likely to be sued for malpractice than law firms that don’t.
In the case of Christ Academy v. Hermes Sargant Bates, it appears that in addition to being underinsured, a major issue prompting this lawsuit was the attorney’s fee bill of $400,00, an amount, the school claims was four times the agreed upon budget. It’s likely that the malpractice lawsuit was filed in response to the firm’s pressure to get paid for its services. For tips on how to avoid fee disputes with clients that can lead to malpractice claims, take a look at “Resolutions to avoid fee disputes (and make more money)” by Tim Limieux, practicePRO, January 3, 2013, http://avoidaclaim.com/2013/resolutions-to-avoid-fee-disputes-and-make-more-money/.
Firms that have a history of filing suits for fees against clients are likely to be charged a higher premium for their malpractice insurance. These firms would benefit from working with an insurance broker who has access to multiple carriers and has a deep understanding of lawyers professional liability insurance. To request a review of your firm’s insurance coverage, contact our office at firstname.lastname@example.org or (800) 242-7250.