By Ann Bertelsmann

It does not matter whether you are a candidate attorney, associate, single practitioner or a director in one of the larger law firms, you are always vulnerable to claims by your clients or third parties who are affected by errors or omissions that you might make in practice.

These claims are a reality and are on the increase, not only in South Africa, but also in other international jurisdictions like the United Kingdom (see 2015 (February) Risk Alert Bulletin 2).

In a previous article, ‘Is your firm at risk for claims by clients or third-parties’ (2014 (May) DR 26), we published some South African professional indemnity (PI) claim statistics and in a subsequent article, ‘A PI claim’s waiting to happen’ (2014 (July) DR 20), we looked at some of the things that can go wrong in practice and lead to such claims.

What can you do to protect yourself or your practice against such claims and their sometimes devastating financial and reputational effects?

Common sense dictates that practices need to protect themselves by –

• minimising the risk of making mistakes and of claims-prone situations occurring;
• effectively managing the situation when problems or mistakes do occur; and
• ensuring that they have adequate insurance cover against the consequences of unavoidable mistakes.

Two important, protective steps in minimising the risk of making mistakes

Step 1: Use Minimum Operating Standards (MOS)

In previous articles we have strongly recommended that every practice has its own MOS as a primary risk management tool, inter alia, to minimise the risk of PI claims. The MOS is your shield against your own mistakes and omissions and those of others employed in the practice. But what if the practice you work in does not have MOS, and refuses to put any in place?

If you are a director or partner, you might be able to persuade your co-directors/partners to introduce MOS – or to upgrade existing ones – and you should do whatever you can to do so. Remember that all directors or partners are jointly and severally liable for any damages suffered by clients or third parties as a result of the running of your practice.

If you are employed in any other capacity, your powers of persuasion may well be limited. Fortunately for you, you will not bear the financial brunt of any claims brought against your firm. However, your own reputation (and your continued employment) are at stake. You need to make sure that you protect yourself by avoiding unnecessary errors. You can start by drawing up your own MOS and checklists for the type of matters that you deal with.

The MOS are your biggest ally. Stick to these standards. Ensure that everyone you work with is familiar with your standards and adheres to them. This applies especially to your personal assistant, filing clerk and anyone to whom you delegate work.

Your MOS should provide rules, checks and balances for aspects of your work such as –

• drafting and signing letters of engagement;
• file order;
• communications with client and others;
• filing;
• the making (and content) of file notes;
• diary management;
• document checking and management;
• delegation;
• handling correspondence and filing;
• settlement negotiations;
• billing; and
• handling of client complaints.

In this regard, you may wish to consult the Risk Management Tips document available on the Attorneys Insurance Indemnity Fund (AIIF) website at www.aiif.co.za.

Step 2: Engage the help of colleagues

A mentor, more senior staff members and your peers can be valuable sources of support for many reasons. Support staff can also be very useful allies. Use them all – and reciprocate. The following are some possible ways that this can be done:

• Discuss your more difficult matters or aspects of law/procedure that you are uncertain about, with one or more colleagues or a mentor. They may raise perspectives that you had not thought of. They may have come across a similar situation in one of their own matters and be able to point you in the right direction.
• Ask a colleague to proofread and check important documents. A fresh pair of eyes can pick up errors more easily than your tired eyes can. A fresh approach and perspective may provide valuable input into the final document.
• Agree to audit one another’s files. Again, fresh eyes can often pick up oversights and problems that you have overlooked or have a blind spot about. This could save you from potential embarrassment at best – or even worse – a PI claim. For a full discussion of file audits please read the article on file audits in 2014 (May) Risk Alert Bulletin 4, which can be found at www.aiif.co.za.
• Train and use your support staff. Insofar as you have control over this, carefully select your staff. Train them well to ensure that they do provide the support you need. They need to be made to understand the value that they add in the smooth running of your practice – and the dire consequences of their failure to adhere to standards. They can be an invaluable resource and safety-net, providing back-up in checking documents, reminding you of important dates and timelines and timeously bringing important correspondence to your attention. It must be stressed that all support staff must be properly supervised and should not be left alone to do the work of a lawyer.

NB: A large proportion of attorneys’ PI claims stems from a failure by support staff to understand their role and to appreciate the consequences of their actions or inaction. For example, we have seen several claims arising out of assistants’ having filed away notices of bar, without bringing them to the practitioners’ attention.

• Ask for help. If you are struggling with your workload, enlist the help of a more organised colleague to give you guidance on better time-management and how to prioritise effectively. If you genuinely have an unmanageable workload, say something to someone who can help. Or if you are in a position to choose, either do not take on additional work or delegate the work to someone else.

If you suffer in silence and work excessively long hours or cut corners to keep up, the quality of your work is likely to suffer and the chances of making mistakes increase.

• Ask for information.

– Your librarian (if you have one) can be a valuable research resource. Otherwise, try the KwaZulu-Natal (KZN) Law Society Library, which has opened its doors to the whole profession. (E-mail their helpdesk at help@lawlibrary.co.za).

– The South African Legal Information Institute (SAFLII) also provides free online access to legal information, including case law at www.saflii.org.

– The Law Society of South Africa (LSSA)’s website also has helpful information at www.LSSA.org.za.

– The Attorneys’ Development Fund (ADF) can assist in suggesting suitable computer programmes to help new practitioners in setting up their systems (see www.adfonline.org.za).

– LEAD (the education wing of the LSSA) runs many helpful courses at a minimal charge (www.LSSALEAD.org.za).

– The Attorneys Insurance Indemnity Fund (AIIF) may also be able to assist with your queries about avoiding claims and managing claims-prone situations. You can contact the AIIF at (012) 622 3900.

• Register your firm and your time-barred matters with Prescription Alert, who offer the use of a computerised diary back-up system at no cost to you. See www.aiif.co.za/prescription-alert.

Managing the situation when problems or mistakes do occur

• If this is within your control, be sure that your practice has a complaints handling procedure. This may ensure that a client’s complaint is effectively dealt with before a claim is made.
• If you realise that an error has occurred, immediately report this to a senior person. Usually, the longer you leave the problem, the worse it gets. There may be a way to salvage the situation and at least mitigate the risk. For example, if you allowed a default judgment to be taken against your client, you may be able to have the judgment rescinded at minimal cost.
• If an error has occurred and there is the risk of a claim, immediately notify the AIIF. They can assist you in looking at ways to mitigate the risks and will, in certain circumstances, even assist in providing funding towards risk mitigation.

Insurance cover for claims

Where the trust money of a member of the public has been misappropriated by an attorney or his staff, the Attorneys Fidelity Fund (AFF) will only provide compensation to them as a last resort – once your practice and all its directors’ or partners’ estates have been fully excussed. This means that your business and personal estates are at risk.

At present, all practices and practising attorneys enjoy a certain automatic, primary level of PI cover through the AIIF. Your practice is at risk for payment of the deductible (excess) and any claim payments insofar as they exceed the applicable limit of indemnity. (See the schedules to the master policy at www.aiif.co.za/policy.) You will probably also have to spend non-billable hours attending consultations and hearings. More importantly, your reputation is at risk and no insurance cover can fix this.

You are advised to retain the services of experienced brokers, who can arrange the most appropriate cover for your ‘top-up’ professional indemnity (in excess of the PI cover provided by the AIIF) and misappropriation of trust money by staff. (This insurance will be in addition to your general business cover, such as cybercrime policies, office insurance and keyman policies, to name but a few.)

Implementing some of the above ideas and recommendations will go at least part of the way towards protecting you and will hopefully remove some of the anxiety and uncertainty often associated with legal practice.

Ann Bertelsmann BA (FA) HED (Unisa) LLB (Wits) is the legal risk manager for the Attorneys Insurance Indemnity Fund in Centurion.

This article was first published in De Rebus in 2015 (Aug) DR 24.