1. Not Every Mistake is Malpractice—Everyone makes mistakes. An attorney’s duty to keep clients informed generally includes a duty to self-report material mistakes impacting the representation. However, there is a fine line between reporting ‘just the facts’ and admitting legal malpractice. The former may help meet an ethical obligation, while the latter may lead to a malpractice claim. Most Attorney Malpractice Insurance carriers have ‘Hot Lines’ set up to help an attorney with not only ethical obligations but how and what should be disclosed to the client. The ‘Hot Line’ is generally free and confidential. You may also want to consider getting your malpractice insurer involved before communicating the mistake to your client.
2. A Claim May Not Lead to a Lawsuit—Just because a client is upset with your representation does not mean that a lawsuit will commence. Again this is a good time to get on that ‘Hot Line’ to discuss what to do.
3. Ignorance is not Bliss—Attorneys that ignore legal-malpractice claims go down a path that can be hard to recover from. Not reporting to your carrier per the terms of the policy a potential or actual malpractice claim can lead to denial of the claim and worse. The non-reporting of claims by attorneys give rise to stories of ‘what not to do’. We actually had a firm wait until they lost the appeal of a mistake to notify the insurance carrier of the mistake. A couple of years had passed between the mistake and the notification. Guess what the claim was denied.
4. Any Resolution May Require Insurer Consent—Most Attorney Malpractice policies do not allow the insured to negotiate a settlement without the insurer’s consent. Attorneys that do likely will find that the insurer is not bound by the settlement agreement. And the attorney could jeopardize malpractice coverage.
Finally keep in mind your malpractice policy renewal date. If you are close to renewal someone in your organization is likely signing or has signed their name attesting to ‘no knowledge of claims’. Not reporting a known issue at renewal can be viewed a material misrepresentation. Remember the above referenced ‘Hot Line’ generally does not constitute notification of a claim to the carrier. A materially misleading renewal application can cause coverage to be declined or a policy being rescinded.