Many attorneys are upset when they find out that suing
clients for unpaid legal fees can cause their lawyers malpractice insurance
premiums to increase. In fact, with many
admitted Lawyers Professional Liability Insurance carriers as few as 5 suits in
a 2 year period of suing clients for unpaid legal fees can cause the carrier to
either decline to write, non-renew your insurance or place restrictive policy
exclusions on your policy.
An attorney states, “I want to get paid for the work
that I do, so why does my Lawyers Liability Insurance carrier care?”
Fee suits of clients are one of the leading causes of Lawyer’s
malpractice claims. Either through a
counter claim, cross-complaint or a disciplinary complaint. From a malpractice carrier’s perspective if you
sue enough clients eventually you are going to have a claim. Once a counter claim(s) are made against a
firm because of fee suits, the firm becomes a less desirable Lawyers
Professional Liability Insurance risk.
Law firms that refuse to change fee suit practices likely will pay a higher premium.
Attorneys states “I understand all that, but I do not like
having a legal malpractice insurance carrier telling me how to practice
law. Give me a carrier that does not
care about suing clients for fees.”
For the most part the only carriers that “do not care” about
fee suits are non-admitted Lawyers Professional Liability Insurance carriers or
carriers that will soon be out of business.
And even the insurance carriers that will write you, even without claims,
will charge significantly more for the privilege of suing clients for fees.
So how do I get paid if I do not sue to collect from clients
that refuse to pay?
The law firm should change its ways. A few simple tips may result in fewer clients
not paying fees:
Client selection. If the client does not have the resources to
pay you, likely not a client that you want. No sense is doing work for free.
Client communication. Make sure to communicate with your client,
through written and oral progress periodic updates on matters. Treat your clients with dignity and respect. If there is bad news to communicate, do it in
person or at the very least by a phone call.
And do it promptly.
Staff communications. Make sure that your staff handles incoming
and outgoing communications promptly, communicates clearly and concisely in a
Client Retainers. Do not be afraid to ask for the retainer for
your services up front where appropriate.
Either for all of or a large portion of the services.
Client Billings. Make
sure to keep on top of your billings.
Bill promptly, follow-up for past due receivables, and if an account becomes
past due, communicate with the client to find out why. Don’t put off this conversation. Remember many times client is upset with something
and this is why the bill is not being paid.
Choose your battles carefully. If the balance is small or there are serious
issues as to how the services have been rendered, you may just want to write
this one off.
As a very last resort, look at suing the
client. If the firm is large enough, a committee
should decide which accounts should go to suit.
And if you are going to sue, where possible wait
for the statute on your services to run.
Many law firms never sue for fees, either because of their
practice areas, or firm philosophy. As
far as your Lawyers Professional Liability Insurance carrier is concerned, zero
is the best number to answer for fee suits. Continuing to sue clients for fees, will only
cause your Lawyers Liability Insurance premiums to increase.