Tips for Minimizing Law Firm Liability During the Covid-19 Crisis – Part 1 | New York Legal Ethics Reporter

Tips for Minimizing Law Firm Liability During the Covid-19 Crisis – Part 1

This article was originally published on April 29, 2020.

The Covid-19 crisis has upended the legal industry, forcing law firms to adapt quickly to an almost entirely remote work environment. As with any significant upheaval, this sudden and radical transformation of the legal profession creates new risk management challenges for law firms.

In this four-part series we discuss some of the risk management issues that law firms face during the Covid-19 pandemic and offers some tips for minimizing those risks.

Part 1 addresses: “Giving Covid-19 Advice” and “Hoarding and Dabbling”
Part 2 addresses: “Client Intake and Conflicts” and “Deadlines and Statutes of Limitations”
Part 3 addresses: “Proofreading Errors” and “Supervising Attorneys and Staff”
Part 4 addresses’ “Confidentiality and Cybersecurity” and “Isolation, Mental Health Issues and Sickness”

Giving Covid-19 Advice

Right now, clients are bombarding their lawyers with questions about how to respond to the Covid-19 crisis. These include, but may not be limited to:

Does my business qualify for SBA loans and will I be required to give a personal guarantee?
What is the impact if I need to lay-off employees?
What are the extended tax filing deadlines and how do they apply to me?
Is the statute of limitations on my claim tolled?
Do we need to comply with an upcoming discovery deadline?
What are my risks if I ask an employee to go into the office to collect a critical item?
Should I file an insurance claim for my business interruption losses?

The risk of responding to these questions is that Covid-19 related laws, executive orders, and administrative court orders are being issued quickly and are changing on a daily basis. In addition, many of these edicts are not paragons clarity and they have not yet undergone judicial review. As a result, lawyers may be answering these questions without the benefit of considered analysis or interpretive guidance. Consequently, in the heat of the moment, well-intentioned lawyers may be giving faulty legal advice. Unfortunately law firms will not feel the effects of those errors for months or years, after clients start filing legal malpractice claims.

And make no mistake. Clients will file legal malpractice claims arising from erroneous advice they are getting today. One thing we have learned from prior economic downturns is that they correlate to a rise in legal malpractice claims.

One cure for this ailment is coordination. Law firm management should implement some protocol for tracking Covid-19 related information and advice. For example, several law firms have assembled multi-disciplinary resource teams to analyze Covid-19 legal developments and share information. Law firms should consider adding procedures to coordinate how that information is disseminated within the firm and then dispensed as legal advice to clients. Lawyers should also be instructed not to “go it alone” when advising clients on Covid-19 matters and – most importantly – to stay within their spheres of expertise. If a client asks her transactional lawyer an employment-related Covid-19 question, the lawyer should not try to figure out the answer herself. Instead, the firm should establish a clear procedure for referring these types of questions to the appropriate person.

This brings us to our second risk management topic.

Hoarding and Dabbling

Right now, the potential for hoarding extends beyond household paper products. Lawyers, like many people, are anxious about their financial futures. As business dries up, lawyers are worried their compensation will be cut or they may even lose their jobs. In desperation, some lawyers may start “hoarding” work. What does that mean? It means, for example, that when a transactional lawyer learns that her client has a dispute with a business partner, the lawyer tries to solve the problem herself instead of passing it on to the firm’s litigation group, because she thinks she needs more billable hours.

A related problem is “dabbling” where a lawyer – due to similar financial concerns – starts to drift outside his practice area. For example, a commercial litigator whose business is slowing down due to court closures may put out feelers for employment, bankruptcy or insurance work, because that is where most of the business seems to be.

Hoarding and dabbling are dangerous because they almost inevitably lead to mistakes, which lead to unhappy clients and, in some cases, malpractice claims. Law firm management should remind lawyers of their duties of competence, caution against straying outside their practice areas, monitor client intake forms to ensure that new matters are allocated to the correct practice groups, and spot check time entries to confirm that lawyers are spending their time appropriately.

Check out the rest of our four-part series for more tips.