Legal Malpractice Claims Costing More, Settling Sooner, Research Shows

Insurers and law firms are settling legal malpractice cases earlier as their costs increase, suggests a new study from the American Bar Association (ABA). The study also showed changes in the number of claims by practice area, a rise in successful claims, and more claims against large corporate firms.

The Business Trial Group specializes in legal malpractice lawsuits on a contingency-fee basis. We have filed malpractice cases against well-known corporate law firms for significant errors made on behalf of clients.

Unfortunately, in some large corporate firms, billing the client is the firm’s primary objective. Such a fixation on the billable hour often leads to mistakes that can negatively impact the client—leaving a client shortchanged even when they spend big.

Were you the victim of legal malpractice? The Business Trial Group can help.

ABA Study Results

Every four years the ABA’s Standing Committee on Lawyers’ Professional Liability reports on trends in legal malpractice claims, based on insurance company data. Significant trends found in the most recent report (“Profile of Legal Malpractice Claims 2012-2015”) include:

• There are more malpractice claims related to family law; trust, estate and probate; collection and bankruptcy; and business transactions and commercial law. Claims in all of these areas rose, but the most claims over the 4-year period were against plaintiffs’ personal injury attorneys. Real estate claims—the leading claims category for 2008-2011—rank second in the most recent report, reflecting a more stable market. ABA says the prevalence of estate, trust and probate claims will continue to grow as the baby boomer generation transfers wealth at a record clip. 

• Claims are more successful. Claims that ended with no payout to malpractice claimants decreased from almost 60 percent in 2011 to 43 percent in 2015. In addition, insurer payouts were up across the dollar amount spectrum. Payments of $50,000 to $200,000 nearly doubled between 2011 and 2015; payments of $500,000 to $1 million rose almost fivefold; payments of $1 million to $2 million increased from 49 in 2011 to 444 in 2015; and payments over $2 million rose more than threefold. 

• There are more claims against large corporate firms. ABA found that large corporate law firms, compared to smaller firms, saw the largest uptick in malpractice claims (1% increase).

High Rates May Contribute to Dissatisfaction

A study member, explaining the rise in malpractice claims against large corporate law firms, told ABA the “client base for large firms has been conditioned over the past decade to be more critical and escalate dissatisfaction into claims.”

That could be because at big law firms, hourly rates are as high as $2,000.

A successful malpractice claim must show attorney negligence.

When clients pay top dollar for legal representation and don’t receive top results, it’s understandable why their dissatisfaction could escalate into a malpractice claim.

To succeed, a malpractice claim need not prove that the attorney/the law firm had malicious intent. It merely needs to show that, if not for the attorney’s actions or omissions, the client would have achieved a more favorable outcome in the case.

But as a Business Trial Group client recently learned, some instances of alleged malpractice are difficult to describe as anything other than malicious.

Business Trial Group Helps Legal Malpractice Victims

The Business Trial Group is currently representing clients who are the victims of a series of remarkable legal errors by Phelps Dunbar and Phelps Dunbar attorney Michael Brundage.

In 2010, our clients hired the well-known law firm Phelps Dunbar to represent them in a bankruptcy case and to pursue fraudulent transfers made by the debtor before filing the bankruptcy. The bankruptcy stemmed from a $5 million verdict the clients obtained against their home builder for construction defects.

At the time the clients retained Phelps Dunbar and filed a lawsuit in Georgia to recover a fraudulent transfer, the handling attorney, Michael Brundage, filed the Georgia case even though he was not licensed to practice law in Georgia. In an effort to avoid the unlicensed practice of law, Phelps hired another firm to act as local counsel in Georgia, but local counsel terminated its relationship with Phelps, saying that Phelps had shown indifference to the clients by not providing information necessary to obtain pro hac admission for Brundage and move ahead with the lawsuit.

Phelps Dunbar then assigned a new attorney to the case from its Mississippi office who was licensed to practice in Georgia. However, after amending the complaint, Phelps failed to appear at the pretrial conference and the case was dismissed after the expiration of the applicable statute of limitations.

When lawyers fail their clients, the consequences can be dire.

Incredibly, two days after the case was dismissed, Phelps advised the clients to reject a seven-figure settlement offer from the transferees at mediation. As alleged in the complaint, Phelps was unaware of the Georgia case dismissal when it advised this course of action.

A similar action in Florida against additional transferees was also dismissed after it remained dormant for nearly two years. Phelps Dunbar also failed to inform the clients why this case was dismissed.

In addition to the neglected lawsuits, Phelps Dunbar provided the clients with inadequate representation during the bankruptcy case that caused both Phelps and the clients to be sanctioned by the bankruptcy court. Furthermore, the clients were never advised of a strategy that would have allowed them to circumvent bankruptcy court altogether and avoid the payment of substantial legal fees to Phelps.

These missteps resulted in the clients losing all ability to pursue fraudulent transfers to cover the original $5 million judgment. They also spent hundreds of thousands of dollars on legal fees that provided a negative return on investment.

Pay Only for Results with the Business Trial Group

Not all legal malpractice is as blatant as the preceding example. But whether a law firm’s conduct is merely negligent or demonstrates a specific intent to harm, a malpractice lawsuit may be warranted.

The Business Trial Group handles legal malpractice and other commercial cases on a contingency-fee basis, so clients always pay for results, not hours.

Find out how we can help right the wrongs of another law firm during a free case review.