Making a practice of suing clients for unpaid legal fees is like playing the lotto. The more you sue the greater your chances of getting a retaliatory malpractice claim or disciplinary complaint.
An attorney will state, “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 a leading cause of Lawyer’s malpractice claims. From a malpractice insurers 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 one of the least desirable attorney malpractice insurance risks. This is especially if the law firm refuses to change its practices of suing clients to collect legal fees.
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 attorney malpractice insurers as few as 5 fee suits in a 2 year period for unpaid legal fees can cause the carrier to either decline to write, non-renew your insurance or add restrictive policy exclusions.
Attorney’s state, “I understand all that, but I do not like having a legal malpractice insurer 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 attorney malpractice insurers or insurers that will soon be out of business. Insurers that will write you 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 needs to change its ways. A few simple tips will result in fewer poor paying clients:
1. Client selection. If the client does not have the resources to pay you at the engagement, likely client will not have the resources at the end of the engagement. No sense is doing work for free.
2. 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.
3. Staff communications. Make sure that your staff handles incoming and outgoing communications promptly, communicates clearly and concisely in a respectful manner.
4. 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.
5. Client Billings. Make sure to keep on top of your billings. Bill promptly, follow-up for past due receivables, and if account becomes past due, communicate with the client to find out why. Don’t put off this conversation. Remember many times a client is upset with something and this is why the bill is not being paid.
6. 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.
7. As a very last resort. If the firm is large enough, a committee should decide which accounts should go to suit.
8. Wait for the statute to run. No sense is inviting a retaliatory claim without this defense.
Many law firms never sue for fees because of client procedures; their practice areas, or firm philosophy. As far as your attorney malpractice insurer is concerned, zero is the best number to answer for fee suits. An attitude of its okay to sue clients for fees and it is my right will cause your lawyers liability insurance premiums to increase.