A common administrative error that causes many attorney malpractice claims involves statute of limitations issues. By one estimate at least 1 in 5 attorney malpractice claims involves a statute of limitations being missed. While determining the statute of limitation in a given state is relatively easy. Applying it to the facts involved can be tricky.
In the case of Hahn v Dewey & LeBoeuf Liquidation Trust in 2012, $7 million was demanded by the IRS. The plaintiffs stated that it was because they received flawed tax advice in the 2000 to 2001 timeframe. The case was brought in New York that has a 3 year statute of limitations period. But New York applies an “occurrence” rule to legal malpractice cases. The “occurrence” rule states that the clock starts when the act occurred that caused the error, not when the error is discovered.
The New York Supreme Court dismissed the action because the alleged malpractice was time barred. The Plaintiffs appealed to the Appellate Court which upheld the Supreme Court’s dismissal. The Appellate Court stated that “what is important is when the malpractice was committed, not when the client discovered it.”
Knowing the applicable statute of limitation period is important for attorneys to know so that they can properly advise clients and also to properly set up their calendaring for each case. It is important for the attorney to not only know the applicable statute, but also to review and apply any contract or other data that may also apply. Attorneys need to be prepared for when the statute of limitations bell tolls for them.
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Lee Norcross, MBA, CPCU
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