Two Firms Sued After they Disband their Practice

Lawsuit Filed for Overbilling

The California-based law firm of Lackie, Dammeier, McGill & Ethir has recently been sued for overbilling by a local police union.  The firm, comprised of former police officers who became lawyers, has faced other recent legal challenges as well.  This most recent matter arises out of a close look at the billing practices and hours of the partners at the firm done by the union.  It is alleged that double or triple billing had taken place, leading to one partner billing 70 hours in a single day and padding the hours elsewhere.  The plaintiff is also presenting evidence that some of the billable hours took place while one lawyer was suspended from practicing law by the state bar.

Law Firm Sued Over Real Estate Transaction

The East Coast firm of WolfBlock, LLP was sued by a client over a real estate deal gone sour.  Two New Jersey property owners have filed an $8M lawsuit against the firm, alleging that the firm represented both them (as the seller) and another party (the buyer) in the same transaction, creating a conflict of interest.  The plaintiffs also claim that the firm mishandled the back-end of the deal and violated various land commitments and partitioning requirements.

This claim serves to remind firms that real estate work has been the named the leading cause of lawyer’s malpractice lawsuits in 2012.  If engaging in this work, it is important to be knowledgeable and follow precise internal procedures and quality control policies.

Lawyer’s Malpractice Tail Insurance

The surprising issue behind both these matters is that the firms are both defunct – yet were still sued.  Many firms erroneously think that once they shutter their doors, the risk is shuttered as well.  This is simply not the case.  In most states, clients of law firms have years to make a claim before the statute of limitations run out.

Both of these cases illustrate that a firm’s risk does not end when their practice does.  If a firm is thinking of closing their practice, the firm is being acquired, or the partners are going separate ways, their completed work while at the original firm does not follow them to a new firm.  This means that the insurance for that original firm must also continue.  This is accomplished by purchasing  an extended claim reporting period on the policy – also known as a “tail.”

A tail allows a firm to stop buying annual insurance, but still report claims that may come in the future on work they have done in the past.  Since discovery of errors and may not arise for months or years after the work is done, it is important for a firm to purchase this tail insurance once closed.  It is also vital for the duration of the tail – the time allowed to report claim in the future – match the longest statute of limitations allowed out of all the states that firm has performed work in.

Tail insurance is often expensive – costing multiples of a firm’s current professional liability insurance premium.  There are ways to mitigate this, and if your firm is looking to close or be acquired, contact us today to discuss.