Studies indicate that professional liability claims against attorneys are increasing dramatically. The grounds for the lawsuits run the gamut of associated allegations, from unintentional errors to failure to fully address client concerns, conflict of interest, and actual breach of fiduciary duty.
Understandably, of course, having insurance protection is something that all attorneys and law firms should have.
Read on for attorney professional liability insurance claim scenarios.
malicious pursuit
An attorney’s company filed an eleven-count complaint on behalf of their client. The action was then dismissed. The client turned around and sued the law firm for malicious prosecution. The legal firm was not overly concerned because it was clear that the plaintiff could not succeed in all aspects of the case. This is why he went ahead with a defense. To the chagrin of the law firm, the wealthy plaintiff intended to harmonize them. He therefore opted to take the case to the trial and appellate courts, resulting in payouts of over $1 million for the insurance company’s defense.
Legal Negligence/Legal Error
A legal firm filed a bad faith complaint against an insurance provider on behalf of some homeowners. The lawsuit concerned complaints about the insurance company’s denial of associated mold and water damage claims. The law firm helped facilitate a settlement in which the owners were awarded $190,000. After the settlement, the owners filed a $635,000 lawsuit against the law firm for legal malpractice for allegedly taking too long to file the original complaint, as well as for what they claimed were serious professional errors. The owners said they were forced to accept the settlement, leaving them with less than full value as a result of a weakened case. The law firm’s insurance paid approximately $100,000 in defense costs resulting in a $120,000 settlement.
Negligence or breach of contract and fiduciary duty
A law firm was assigned to defend individuals from a lawsuit for embezzlement of family funds. After all parties to the lawsuit decided to put the family home up for sale at fair market value, the lawsuit was dismissed. Previous clients turned around and filed a complaint against the law firm for negligence, breach of contract, breach of fiduciary duty, intentional infliction of emotional distress, misrepresentation, statutory violations, and constructive fraud. Previous clients claimed that they had been misled regarding the sale of the family property. They demanded payment of several hundred thousand dollars for the escalation in the real estate market. Prior to jury selection, the plaintiffs determined that it was in their best interest to terminate the lawsuit. Currently, the plaintiffs have requested an appeal. The law firm’s insurance covered about $200,000 in defense as of now in this ongoing saga.