Failure to Advise of a Mistake
Failure to Advise of a Mistake06.01.2017
My colleague and I were in London last month visiting with professional liability and specialty lines underwriters and claim professionals. During the visit, we reviewed a series of legal malpractice claims that either arose out of or were aggravated by an attorney’s failure to advise his or her client that a mistake had been committed. Unlike other professions where there is no obligation to inform a client of an error, omission or act of malpractice, lawyers have ethical and professionals obligations to do so, and the failure to self-report often makes the claim that may follow more difficult to defend and could create additional liabilities.
This discussion seems topical as we hear talk almost daily on television news shows that the cover-up is often worse than the act. The plaintiff’s bar have latched onto this reality and, where appropriate (or not), have advanced a “breach of the duty to self-report” cause of action in a legal malpractice lawsuit. These allegations of wrongdoing which are in addition to standard legal malpractice claims are typically based on the fiduciary duties of loyalty and communication. The reasons for doing so are sometimes overt so as to obtain fee forfeiture or return of fees, and sometimes strategic so as to strengthen the professional negligence claim by pointing out the lawyer’s attempts to hide his or her mistake.
The requirement of an attorney to advise a client of a mistake is based on several sections from the Model Rules of Professional Conduct (Rules 1.4 and 1.7), common law, and a body of case law that has developed as a result. That being said, telling a client that a mistake has been made is not the same as admitting fault or requiring an attorney to fall on the proverbial sword by making a settlement payment. In fact, I caution such an extreme approach will almost without question violate a “no admission of liability” clause of a legal malpractice policy where the admitting of fault and/or agreeing to a payment vitiates coverages.
With this in mind, it is useful to bear in mind that an attorney error does not always equate to legal malpractice since, in order to succeed with such a claim, a claimant must not only establish wrongdoing but also resultant damage. As a defense attorney, I was successful defending legal malpractice cases on this issue of causation. A good example is where a plaintiff’s attorney fails to file a personal injury lawsuit within the applicable statute of limitations. If the underlying tort claim has no merit or if the plaintiff’s injury has no value, any malpractice claim for the failure to timely file the lawsuit is without legal merit.
Moreover, not every mistake needs to be reported. Clerical or typographical errors in a pleading that can be corrected without any adverse effect on the representation or a missed deadline that can be overcome by obtaining an extension of time for filing a motion or pleading with no meaningful consequences for the client are examples of situations where the duty to self-report does not arise. Rather, generally speaking, a mistake or error has to be “material” (what was the mistake and did it harm the client) before an attorney is required to advise a client of the same.
In the end, an attorney must recognize that when a professional mistake has taken place (i) there is the obligation to keep the client apprised of information that is material to the representation; (ii) the client’s interest is paramount to an attorney’s own interest; and, (iii) the lawyer must avoid conflicts of interest (which could require the end of the representation). As such, an attorney should avoid the gut reaction to try and fix the problem, and/or not tell anyone out of embarrassment or other self-serving interest, in violation of ethical and practical considerations to avoid the same negative consequences of many of the claims I reviewed in London including (i) State Bar disciplinary proceedings; (ii) additional causes of action (beyond mere negligence) and damages in a legal malpractice claim; (iii) fee disgorgement; and, (iv) potential loss of coverage under a professional liability policy.
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