The Wall Street Journal reports this week that law firms are increasingly facing claims by disgruntled clients and former partners:
Getting blamed for poor results is nothing new for law firms, but they say clients have become more willing to sue in recent years. Claims of employment discrimination and firm mismanagement also are popping up more often as postrecession, law firms cull their ranks and sideline some partners in an attempt to boost profits for those who remain.
Ropes & Gray and McDermott Will & Emery are among firms facing major malpractice suits. Last month a federal judge in the District of Massachusetts denied Ropes & Gray’s motion to dismiss an $83 million lawsuit concerning the firm’s handling of patent applications for Cold Spring Harbor Laboratory. And a case brought by J-M Manufacturing Co. against McDermott touches on a number of hot topics for large law firms, including the use of contract attorneys and the protection of client data. J-M is alleging that negligent oversight of contract lawyers led to the release of nearly 4,000 privileged documents to the U.S. Attorney’s Office in Los Angeles.
The increase in the size and frequency of such claims has led some firms to beef up their professional liability coverage:
Professional-liability insurance typically has been among the top operating costs for law firms, after compensation and real estate. Most firms, particularly those with 50 or more lawyers, buy malpractice insurance, says Anne Marie Davine, who leads the U.S. law-firm practice at insurance broker Marsh. The biggest firms are taking out multimillion-dollar policies, and midsize partnerships that may have been underinsured are increasing their coverage, insurance brokers say.
Given the risks involved, such precautions are probably a smart choice for law firms. But the added costs associated with increased coverage will only add to the trend of rising expenses that are making growth so difficult in the current legal economy.
Posted by Emily Fisher