Faulty Engagement Letters Is #1 Cause of Claims
Seriously; you still don’t require that your clients execute an engagement letter? Apparently not. Professional Liability Matters routinely warns of the risks of representing a client without a clear engagement letter. In addition to laying out the objectives of the representation, well-crafted engagement letters help to reduce the likelihood of claims from dissatisfied clients. It would seem obvious, then, that attorneys would require clients to sign an engagement letter as a prerequisite to any attorney-client relationship. However, in a recent national legal malpractice conference held by the ABA, industry experts cite faulty or missing engagement letters as the most prolific cause of legal malpractice claims.
In a review of active legal malpractice claims, one malpractice insurer noted that in over one-third of the disputes it was defending, the attorney never drafted an engagement letter. In the cases where the attorney had drafted an engagement letter, only one in seven included language that effectively limited the scope of the attorneys’ liability.
The experts pointed to several sources for the lapse in attorney engagement letters. In some cases, attorneys may avoid limitation language in the hope that they will open the possibility for broad representation of large clients. In other cases, lawyers may provide “casual” advice and they don’t send a disengagement letter to end any possibility of an unexpected attorney client relationship. Finally, too often firms rely on generic, boilerplate engagement letters that are not specific to the particular task at hand.
It is absolutely essential to craft a proper engagement letter for each and every assignment with each and every client. This is perhaps one of the simpler steps to avoid protracted litigation down the road.