Lawyers Without Legal Malpractice Insurance

I am fortunate to receive many calls on many types of cases, some of which fall outside of my normal practice area.  i decided I would seek out a lawyer to whom I could associate on a particular type of case – this lawyer enjoyed a good reputation on cases of this type.  I called him and had a general discussion about the type of calls I was getting and inquired whether he was interested in receiving some referrals.

He said he was, and we had a discussion about how we could work together to assist future clients.  I had a good feeling about the potential of working together.

Then, I asked him to confirm that he carried legal malpractice insurance.  He said he did not,  I told him I could not sleep at night if I did not have legal malpractice insurance for our firm.  He said that if he got sued and put in a position of probable financial loss he would  file bankruptcy and avoid the loss.

And that ended that.  This lawyer will receive no referrals from me.

I have two problems with his position on this subject.  First, he did not have legal malpractice insurance.  I cannot understand why any professional would not have professional liability insurance.  I don’t care how good you are (or think you are) at your profession, sooner or later you will make an error that can’t be fixed that will harm a client.  It will happen.  Or you will be accused of doing so.  In any event, you need professional liability insurance to assist you in hiring a lawyer, providing you with a defense, and paying the claim if it is determined to be valid.  

But even more troubling is the attitude of this lawyer.  By suggesting that he would seek bankruptcy protection in the event that he caused harm to the client, he demonstrated to me that we did not share the same attitude about the relationship between lawyers and clients.

I purchase professional liability to protect myself, but more importantly I purchase it to protect my clients if I make an error that causes them harm  I could save tens of thousands of dollars a year by not purchasing insurance, hoping that I didn’t make a negligent error that hurt a client, and hoping that I could readily afford to pay for the consequences of any such error.  But I don’t want my clients to take the risk that I cannot pay,and I don’t want them harmed by my error.  Therefore, I purchase insurance to protect them – and me – from financial loss.

I can’t imagine not wanting to give that financial protection to a client.  I just cannot imagine it.  I think most lawyers feel the same way.

Coincidentally, I received an email from a well-known Nashville lawyer about the same time as the discussion described above.   It turns out that he investigated a legal malpractice case and neither the potential lawyer defendant or the lawyer’s firm had malpractice insurance.  The client was left holding the bag.

What in the heck is going on?  Is the legal economy so bad that lawyers are dropping their malpractice insurance?  Or is it just that there is just some number of lawyers out there who are willing to go bare, risking their own net worth and not having any particular concern for their clients? Or do these lawyers just think that they won’t make a mistake?  Really, what is going on?

One last point to ponder.  Tennessee law permits fee splits in referrals of personal injury and wrongful death cases if (a) the fact of the referral fee is disclosed to the client and (b) each lawyer remains jointly and severally liable for the work of the other.   Remember that next time you want to make a referral.