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How to avoid a claim

How to avoid a claim

By Sophie Patten



The Legal Practitioners’ Liability Committee (LPLC) has advice about sound practices to minimise risk.

Having a claim made against you can be stressful and damage your confidence as well as affect your professional credibility and personal reputation. It can also affect the profitability of the business through increased insurance premiums and dented client relationships.

It is never too early to adopt sound risk management practices to avoid a claim so start the way you want to continue. Learn about the best claim prevention practices and continue learning about them throughout your career.

Nobody deliberately chooses to have a professional liability claim, but everyone has a choice about how seriously they take claims prevention. Some go further than others to reduce their exposure and this is often influenced by perceptions of the risk and rewards of certain behaviour and actions.

What is risk management?

Risk management involves identifying, analysing, monitoring and, where possible, controlling risks. This involves recognising and responding to the causes of claims by implementing structures, systems, policies and procedures to reduce risks and minimise or prevent claims.

Where to start

To prevent claims you need to know what causes them. As with any problem, if you misdiagnose or assume the wrong cause you run the risk that the chosen solution will not be effective.

At LPLC we not only look at what goes wrong but also the underlying causes of the claims – the why.

Characterising underlying causes of claims and contributing factors provides a useful framework for identifying whether you are doing the right things to reduce your claims exposure as well as doing things right.

Where young lawyers get caught out

Failing to properly manage the lawyer-client relationship

Failing to clarify the scope of the legal work that lawyers have been retained to perform, together with the likely cost and time frame, exposes them to claims. LPLC receives claims where lawyers maintain they didn’t act for the “client” now suing them or they were instructed on a limited basis, not the expansive manner subsequently alleged. In such claims, it is common that the lawyer has not set out “who is doing what by when” in writing and, if the retainer is limited, the risks to the client of such an approach.

It is tempting to leap into doing the work the client has requested without considering the wider framework in which the work is to be performed.

The cost disclosure provisions in the Legal Profession Uniform Law Application Act 2014 help manage client expectations of costs but lawyers still need to confirm the scope of the retainer and timing of services in writing as well. The more detailed the scope, the easier it is to maintain boundaries to your professional obligations.

Avoid misunderstandings about the extent or nature of the legal work you have been asked to perform by clarifying it at the outset.

Failing to manage and understand the legal issues

Not many claims arise because lawyers get the law wrong. The more common scenario is a problem with the legal strategy – where all the issues have not been thought through or assumptions are made that are wrong.

One of the major problems is inherited or transferred files where the legal issues are uncertain or complex, the client is disillusioned or difficult (or both) and the path to resolution is not straightforward.

The temptation is to follow the inherited legal path the file sets out but the better option is to consider the whole matter completely anew. Transferred files are claims-prone but their risk can be substantially reduced if you approach the file with an open mind.

Failing to properly communicate

Communication breakdowns leading to claims don’t just occur between lawyers and clients: they also arise when lawyers within a firm fail to communicate effectively with each other.

Doing a small part of a large transaction, sometimes without knowing the overall context, has its own risks. Use your professional curiosity and ask questions to ensure you know enough to complete your task. If your assigned task is unreasonable or impossible to perform, speak up and ask for help.

The other challenge is to develop communication skills with clients. Be forensic in your instruction-taking and listen to what your client is telling you. Probe a client’s instructions for accuracy, rather than accepting their version at face value.

Failing to keep proper records

Be a diligent record-keeper. Many claims have been saved or avoided by a contemporaneous file note or letter confirming advice. Claims are much harder to defend without the documentary evidence to corroborate the lawyer’s version of events.

There will be times when you will feel you don’t have time to record details of every attendance with your client or others, but make time. Make it a discipline that becomes ingrained in how you work. When you are busy and pre-occupied is when you most need to be making file notes and writing short letters confirming instructions or advice. Don’t expect your memory to be an adequate substitute for file notes or confirming letters. The matter may be indelibly etched on your mind at the time, but three years later when the claim comes in it is unlikely you will have any recollection of the critical event, and even if you do, you may not be believed without the notes.

Systems that don’t work or let you down

Simple oversights in legal practice are commonplace. Most firms develop systems to deal with basic administrative and legal routines so the capacity for oversight is minimised. Claims occur when the systems are not used, are circumvented or are inadequate.

Become acquainted with the systems used by your firm. They are not meant to drag you down – well designed systems applied to repetitive or routine parts of legal practice free you up to think about more challenging things.

Next steps

Risk management and claims prevention involve making decisions and choices about how far you need to go to manage that risk and prevent that claim.

With the ever increasing use of technology as well as the growing financial pressures on the legal industry, best practice in risk management and claims prevention is dynamic and evolving, so you must continue to invest in your education in this area.

Don’t think of risk management as something that needs to go on a time sheet − think of it as investing in yourself. 

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