Risk Management by the Numbers – New ABA Study on Malpractice Claims

Lady Justice

Approximately every four years since 1985, the American Bar Association (ABA) has published a “Profile of Legal Malpractice Claims.” The series, which compiles claims statistics from carriers nationwide, offers a unique window into law firm risk management. The latest installment, which covers 2016-19, was released last month.

Like its predecessors, the latest profile includes statistics by practice area, firm size, and alleged error. Each offers its own insights.

Plaintiffs’ personal injury and family law are the most frequent source of claims, according to the latest profile. Although the Profile does not correlate the severity of claims by practice area, the Profile’s “anecdotal observations” section suggests that business and commercial law have traditionally been higher-risk areas on this score. Regionally, both findings are reflected statistically in the annual reports of the Oregon State Bar Professional Liability Fund, which has the unusual feature of being the required first layer of coverage for all Oregon-based lawyers in private practice.

Likely reflecting the statistics by practice area, solos and small firms comprise over half the claims by frequency, according to the most recent Profile. The authors caution, however, that in many states solos and small firms also comprise the bulk of law firms numerically and that firms of almost all sizes saw an increased number of claims in the most recent reporting period.

As in past years, substantive legal errors made up roughly half of the claims reported. Also as in past years, over one-third of claims stemmed from either administrative errors (such as the failure to properly calendar key deadlines) or client relations (such as the failure to follow client instructions).

Although many lessons can be drawn from the Profile, one seems particularly compelling: Administrative and client relations issues are uniquely within the control of law firms. Close and consistent attention to developing and using systems appropriate to firm size, as well as practice with calendaring and file management to lessen these risks, can pay real financial dividends.