Today’s virtual society has changed how many attorneys operate. Often the law firm’s files are somewhere in the clouds. This allows easy access just about anywhere and eliminates law libraries, file cabinets and large amounts of physical storage. Many attorneys continue to maintain a physical presence but the need for a large facility to do that has changed. As such many attorneys are sharing office space where there can be multiple law firms in one office. This can save money for all parties by sharing receptionists, office supplies and operational expenses.
With a number of law practices now occupying one space, law firms need to be careful as to not give the impression that all of the firms that are in the space are one law firm. In many states all that is needed is the appearance to the general public that it is one law firm and you have created a partnership. A number of years ago the Ohio Supreme Court stated that if it walks like a duck, looks like a duck, it’s a duck. So if your office gives the impression to a client that it is one office, you are opening all of the law firms up to attorney malpractice claims for work the firm did not do.
If you have managed to create the impression clients that the office you are occupying is a partnership, it can lead to claims being filed against your firm for vicarious liability for another attorney’s work. Many attorney malpractice insurance policies limit exposure to these claims by having an office sharing exclusion endorsement attached to your law firm’s policy when the carrier is aware of office sharing. This leads to the unpleasant experience of having an attorney malpractice claim filed against your firm and having no coverage. Even without an office sharing exclusion, many attorney malpractice policies have other provisions that eliminate coverage.
Client confidentiality is another problem. It is very important to make sure that all staff and attorneys know to keep client information separate and secure. Also all staff and attorneys need to go to great pains not to discuss client matters over the office water cooler.
Lastly, it is important that to protect your physical assets and general liability exposure. Make sure that your Business Owners Insurance and Workers Compensation Insurance properly protects your business personal property and your staff. Having one of the law firms have a Business Owners Policy to protect a number of unrelated law firms, will lead to coverage gaps.
Steps that need to be taken:
1. Makes sure that your phones are answered in a manner that does not give the impression that all of the attorneys are a partnership. Ideally, separate phone numbers for each law firm should be maintained. Even if you have just one receptionist, give the receptionist the ability to know which firm that the call is coming in for and to answer it specifically for that law firm.
2. All billing systems, trust accounts, and accounting systems need to be segregated and independently secure for each law firm. Do not send out joint billing statements.
3. It goes without saying that you should maintain separate letterhead, business cards and advertising.
4. Do not share websites with other law firms.
5. Building and office signage should make it clear that there are multiple law firms in the same space.
6. Engagement letters for all law firms in the space need to make it clear that separate law firms are occupying the same space.
7. If the office is going to share one computer system, make sure that there are security measures in place that keep all client information separate and succinct.
8. Physical client files need to be kept segregated and secure.
9. All staff and attorneys need to be aware of making sure that all clients know that there are separate law offices being maintained in the office space.
10. Business Owners Coverage needs to be properly endorsed to make sure that a law firm’s business personal property is properly protected and the policy covers specifically your firm for general liability exposures. Likely each law firm will need its own policy.
11. Workers Compensation insurance, where needed, needs to be properly maintained for the entities that are employing the staff
12. If possible, agreement needs to be reached by all firms that maintain the shared office space that all firms are carrying the proper attorney malpractice coverage, Business Owners coverage, and Workers Compensation coverage.
Sharing office space can be a cost effective approach to keeping a lid on legal office expenses. Just make sure that your office sharing arrangement does not give the appearance of one large law firm. Remember if it walks like a duck, looks like a duck, it’s a duck. Don’t feed the duck.
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Lee Norcross, MBA, CPCU
Managing Director, CEO
(616) 940-1101 Ext. 7080