Quandaries & Quagmires: Risky business: Professional liability claims

The American Bar Association’s Standing Committee on Lawyers’ Professional Responsibility recently published an update to its Profile of Legal Malpractice Claims (“ABA Study”) providing data related to professional liability claims from 2020-2023, based on data from professional liability insurers who shared data with the study. An important limitation to the study is that big law is generally not represented. A separate study conducted by Eileen Garczynski at EPIC Law Firm Group polled 11 professional liability insurers that combined provide coverage to more than 80% of AM Law 100 and NLJ 250 firms (“EPIC Study”).¹ Additionally, Doug Richmond and Andrew Ricke recently compiled information from two leading insurers of large and midsize firms and reported the data anonymously (“Lockton Report”).² Finally, Minnesota’s Office of Lawyers Professional Responsibility published its Annual Report providing insight into disciplinary trends. Collectively, the studies/reports will be discussed to illustrate risk variations among those surveyed and tips to minimize risk will be provided.

Practice area risk trends

According to the 2020-2023 ABA Study, the riskiest practice areas experiencing the highest number of claims are (1) estate, trust, and probate; (2) real estate; (3) personal injury – plaintiff; (4) family law; (5) collections and bankruptcy; (6) business transaction commercial law; (7) patent, trademark, and copyright; (8) corporate/business organization; (9) labor law; and (10) criminal law.³ For context, estate, trust, and probate increased in risk from its previous fourth-place ranking to now atop the leaderboard. This shift in frequency is attributed to the aging population and the highest transfer of wealth comparatively to any other time in the United States.⁴ Likewise, labor law and patent, trademark, and copyright claims increased by approximately 2.6%.

Conversely, criminal lawyers experienced a decrease in claims by 2.2% compared to the 2019 study, as did person injury – plaintiff lawyers (3.58%), family law claims (2.79%), and collections and bankruptcy claims.⁵

The EPIC study had similarities, with trust and estates being in the top three practice areas generating claims, followed by business transactions and corporate and securities.⁶ In the Lockton Report, a notable finding was that although the insurers surveyed covered firms who had both litigation and transactional practices, the transactional practices were the most frequent source of claims.⁷ Explanations for transactional risk include that professional negligence may be easier to prove in transactional practice areas, transactional claims may offer greater compensatory damages, and an additional risk to transactional practices is increasing claims by third parties.⁸

Despite what may seem like doom and gloom, it is important to set the stage. Eighty-two percent of claims in the ABA Study resulted in no payment of the claim and a decrease in severity of indemnity payments when claims were paid.⁹ The EPIC study also reported on the increasing cost to defend professional liability claims, with 10 out of the 11 insurers reporting increases in defense costs. Even if a claim does not result in an indemnity payment, this does not minimize the stress that lawyers and their firms face when a claim is made.

Firm size

The ABA study concluded that firms with five or less attorneys comprised most claims.¹⁰ Notably, the same group also had the net largest decrease in claims, correlating to an increase in claims for every other firm size. Firms with more than 500 lawyers saw a 6.48% increase in claims for a total of 11.10% of all claims in 2023 compared to 4.62% in the 2019 study.¹¹

Cause of claim

Five actions (or inactions) have consistently remained the top five activities giving rise to claims. They are: (1) preparation, filing transmittal of documents; (2) commencement of action/proceeding; (3) advice; (4) pre-trial or pre-hearing; and (5) settlement negotiation.¹² Substantive errors are the largest error category alleged in claims and include failing to know and/or apply the law, drafting errors, conflicts, inadequate discovery/investigation, failure to know/ascertain a deadline, failure to understand/anticipate tax, errors in public record search, and errors in mathematical calculation.¹³ Administrative errors follow and include failing to calendar properly, clerical errors, failing to react to calendar, failure to document—no deadline, procrastination, and lost file.¹⁴ Client relations errors follow, with intentional wrongs claims as the least frequently made claim.

Lawyers are much more likely to experience a claim because they failed to commence an action in a timely matter (up 2.73%), had a drafting error (up 3.99%) or engaged in a conflict of interest (up 2.89%).¹⁵

The EPIC Study found that insurers noted attorney supervision, cyber, and AI risk as top areas of concern for their AM Law 100 and NLJ 250 insured firms.¹⁶

Evaluating risk vis-à-vis catastrophic claims

The Lockton Report identified 83 publicly reported settlements or verdicts exceeding $20 million involving law firms dating back to the mid-1980s, with the largest being a $390 million settlement in 2020.¹⁷ The average settlement or verdict was $47.4 million, with the median at $34.5 million. Of these cases, the claims are attributable as follows¹⁸:

• 39 to dishonest clients
• 13 to conflicts of interest
• 9 to mistakes
• 7 to a combination of dishonest clients and dishonest lawyers
• 5 to a combination of dishonest clients and conflicts of interest
• 3 to a firm’s dishonesty
• 2 to malicious prosecution
• 2 to a mistake combined with a conflict of interest
• 1 to a dishonest client combined with a mistake
• 1 to a dishonest client combined with fraud and misrepresentation
• 1 to a dishonest lawyer combined with a conflict of interest

Representation of an unworthy client represents two-thirds of the reported catastrophic payments, and 17 of the cases in this category involved firms of 1,501 lawyers or more and 26 involved firms with 251-500 lawyers. This is a stark contrast to the ABA Study.¹⁹ Unworthy clients often target larger law firms to benefit from perceived or actual reputational factors. Unworthy client claims are often pursued by third parties harmed. Conflicts of interest are the next chart topper.

Over one-third (29) of these catastrophic cases involved transactional or corporate work followed by securities law (17), commercial litigation (9), real estate (6), bond (5), tax (4), banking (2), bankruptcy (1), intellectual property (2), intellectual property litigation (2), trusts and estates (3), personal injury litigation (1), healthcare (1), and energy (1).²⁰

Ethical complaints and corresponding discipline

Now that we have an overview of malpractice risk, it is also helpful to understand the related risk of disciplinary complaints. As a reminder, ethical complaints can be the ember for a malpractice claim. Do not risk a coverage issue and always remember to report any professional issue to your carrier to avoid a coverage issue down the road.

In Minnesota, 27 lawyers received public discipline in 2024 and 101 received private discipline.²¹ In the public discipline category, five attorneys were disbarred, 14 were suspended, eight were reprimanded, and two of those were also placed on probation.²²  Three of the disbarred lawyers were disbarred for conduct including misappropriation, two were disbarred as a result of reciprocal discipline proceedings that also included conduct in each of the lawyer’s own divorce proceedings.²³ Suspensions resulted from a variety of misconduct including poor boundaries and dishonesty including false statements to the court and others.²⁴ Public and private discipline for ethical misconduct was highest for lawyers with years of practice between 31 to 40 years.²⁵ Lawyers with 11-20 years of experience were a close second.²⁶ Lawyers  from 0-30 years experienced identical levels of public discipline.²⁷

In 2024, the Director issued 95 admonitions involving 243 Rule violations and six private probation agreements, which are private discipline.²⁸ The leading Rule violations cited in Admonitions were: Communications (58); Safekeeping Property (41); Diligence (22); Fees (21); Competence (13); Declining or Terminating Representation (13); and Prejudicial Misconduct (13).

Minimizing risk

To minimize your firm’s risk of professional liability claims and ethical complaints, there are steps firms and lawyers can consider implementing. Implement supervisory procedures and training for associates and staff. Lateral hires who will serve as “supervisory” lawyers within the structure of your firm should be trained on these procedures and expectations of subordinate and staff supervision. Engagement agreements should identify the scope of representation and identify when representation will end. If the firm has an ongoing relationship with a client, there should still be a written acknowledgment of the scope of representation for the new matter. Likewise, ensure matters are closed when the identified scope is completed. Firms should also consider adopting a policy on fiduciary relationships, including the review and oversight of lawyers acting as trustees.

Promote the use of a calendar and docketing system. File maintenance and documentation are imperative, including documenting critical client advice.  Think about the potential for a claim that the lawyer did not advise the client of all the options. A contemporaneous memo documenting the conversation will serve lawyers and clients well. Providing a written summary following these critical meetings will also help minimize risk in this context.

Client due diligence is required to minimize risk in the unworthy client arena. Implement robust conflict procedures, qualitative intake procedures and general counsel or second partner approval are best practices for clients with red flags. Red flags include clients with a history of firing lawyers mid case, prior malpractice claims/ethics complaints against prior lawyers, refusal to allow contact with prior counsel, dubious referral sources, and prior suits against the client for attorney’s fees. Lawyers should also remember that although a client is a current client, due diligence remains an ongoing consideration. Consider for example, entity leadership and financial condition changes that may impact due diligence. Firms should send a clear message that lawyers should not be afraid to turn down work from any client no matter the size of the book.

Fraud and material misrepresentation claims can arise in transactional business sale matters. If a client refuses to disclose facts, consider whether withdrawal is necessary. Ensure that client representations are the product of due diligence.²⁹ Beware of fraud and misrepresentation allegations that may arise from settlement negotiations. Do not misstate your client’s financial position and do not simply recite unverified information.

The practice of law is inherently risky. It is impossible to avoid all risks, but minimizing risk is possible. Rely on your firm’s general counsel. If you do not have general counsel available, consider retaining outside general counsel to assist in developing risk management practices and policies. Contact your professional liability carrier who will often have a wealth of resources available to you and your firm as a policy holder. If you have an ethical question related to your own current conduct, the Office of Lawyers Professional Responsibility has a free advisory opinion service. Finally, if you, your family or legal staff are stressed or distressed, contact Lawyers Concerned for Lawyers for free confidential assistance.

Jennifer Bovitz is a Shareholder and Associate General Counsel at Bassford Remele, P.A. where she is a trial and appellate lawyer who defends professionals in litigated and regulatory matters. Jennifer also counsels clients and firms on risk management and policy development.

Notes

1. EPIC Law Firm Group Releases Key Trends Driving Law Firm Malpractice Claims in Annual Survey, Business Wire, May 21, 2025 https://www.businesswire.com/news/home/20250521897747/en/EPIC-Law-Firm-Group (“EPIC Study”)
2. Doug Richmond and Andrew Ricke, Mapping the Law Firm Liability Landscape in 2025, Lockton, June 2025 (“Lockton Report”)
3. American Bar Assoc., Standing Committee on Layers’ Prof. Liability, Profile of Legal Malpractice Claims (2020-2023) (“ABA Study”) at 10
4. Id.
5. Id. at 12-13
6. EPIC Study
7. Lockton Report at 5
8. Id.
9. Id. at 28, 35
10. ABA Study at 14
11. Id.
12. Id. at 16
13. Id. at 20
14. Id.
15. Id. at 35
16. EPIC Study
17. Lockton Report 7
18. Id.
19. Cf. Lockton Report at 7 with ABA Study at 14-15
20. Lockton Report at 7
21. 2025 Annual Report, Office of Lawyers Professional Responsibility, at 1 (https://lprb.mncourts.gov/AboutUs/Documents/2025%20Annual%20Report.pdf)
22. Id. at 3
23. Susan Humiston, A Year of Public Discipline, Bench & Bar, January/February 2025
24. Id.
25. 2025 Annual Report, Office of Lawyers Professional Responsibility, at Table VII (A.8)
26. Id.
27. Id.
28. Id. at 3 and Table V. (A.6)
29. Lockton Report at 10