The equation is simple – to have a client sue you for malpractice, you have to first have a client. Therefore, the first line of defense in avoiding lawsuits is to perform adequate due diligence when deciding to take a new client.
Malpractice claims arise when a client was wronged or feels they were wronged. While good internal practices and checklists can help prevent an error while working on an engagement, it is also important to have a system in place to make sure that the clients being brought on are low risk.
Below is a list of five key practices to be aware of when deciding to take on a new client. These can be the foundation of a great client intake procedure.
•First, clarify the work product. The client should be clear about what they need, what they expect and the exact nature of the work to be done. A law firm that overreaches or doesn’t understand the full extent of an engagement will find themselves in trouble if a form wasn’t completed, a deadline missed, or a “t” was left uncrossed. Having each client sign an engagement letter that outlines the specific work to be performed will prevent future misunderstandings and may protect you in the event of a lawsuit.
•Second, clients that fail to pay are trouble. Before you agree to take on a new client, make sure the client can pay. A firm may decide to file a “suit for fees” if a client that does not pay. However, many lawyers that decide to pursue this route receive counterclaims alleging malpractice by the client. Performing a credit check or asking other lawyers for their experience with the client are two common and simple ways a firm can perform their due diligence. If a credit check is not warranted, then a cash retainer or milestone billing will prevent a firm from doing work for free.
•Third, specialize in or avoid real estate related clients. Statistically, more malpractice claims have stemmed from real estate related services in 2012 than any other service. If a new client is seeking real estate services, make sure your firm is able to perform such services. Then tread carefully and watch all deadlines, monies and parties carefully.
•Forth, check for conflicts of interest. The firm should utilize a system that intentionally checks for conflicts of interest. The best systems are electronic, regularly updated and regularly used. Paper systems and partner’s memories may be a great first test, but a formal and efficient process is the best.
•Finally, have a formal intake procedure. Having a risk management manual that outlines checklists and a new client approval hierarchy will prevent the intake process from being overlooked or taken too lightly. Any partner of a firm should want to know what clients they are taking on and a formal procedure will ensure that they have full knowledge of each client.
Your firms desire to grow. Growing with the wrong clients can ruin a business. These practices tips noted above can help assure that your firm grows carefully, quickly and successfully.
Contact ProtectLawyers.com to learn more about protecting your firm from allegations of malpractice or for a free assessment of your firm’s insurance program.