Attorneys become upset when they find out that suing clients for unpaid legal fees can cause their attorney malpractice insurance premiums to increase. In fact, with many admitted malpractice insurers as few as 5 client fee suits for unpaid legal fees in a 2 year period causes the insurer to either decline, non-renew your insurance or place restrictive policy exclusions on your policy.
When an attorney states; “I want to get paid for my work, so why does my attorney malpractice insurer care?”
Client fee suits are a leading cause of legal malpractice claims. Fee suits cause counter claims, cross-complaints and/or disciplinary complaints. From a malpractice insurer’s perspective if you sue enough clients eventually you have claims. Once a counter claim(s) are made against a firm because of fee suits, the firm becomes a less desirable legal malpractice risk. Law firms refusing to change fee suit practices likely will pay higher premiums.
Attorney states; “I understand all that, but I do not like having a legal malpractice insurer telling me how to practice law. Give me an insurer that does not care about suing clients for fees.”
Most insurers that “do not care” about fee suits are non-admitted insurers or insurers that will soon be out of business. Even claims free insureds pay significantly more in insurance premiums 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?
Law firms need to change billing practices. A few simple tips may result in fewer clients not paying fees:
1. 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.
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 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.
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, look at suing the client. If the firm is large enough, a committee should decide which accounts should go to suit.
8. 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 attorney malpractice insurer is concerned, zero is the best number to answer for fee suits. Continuing suing clients for fees will only cause your attorney malpractice insurance premiums to increase as well has having to pay your deductible for claims.