You Dropped the Ball: Now What?

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There are so many risk management sources, theories, and tips for the practitioner seeking to avoid a malpractice claim. But, there is less direction available to the professional that does make a mistake and knows about it. What are the obligations to the client, to the carrier, to others once we discover that we’ve dropped the ball? Are there implications on the statute of limitations? The South Dakota Supreme Court addressed these questions in a recent decision.

In the decision, available here, the court reversed the dismissal of a malpractice claim against an attorney who handled an underlying auto accident matter on behalf of client. The attorney knew that she had failed to timely serve the underlying defendant. While the attorney testified that the client knew that the adversary was not served, the attorney did not tell the client that it was she–the attorney–who was to blame. Although the attorney placed her malpractice carrier on notice, she did not inform the client of the mistake.

The court addressed an attorney’s obligation to keep the client reasonably informed, which included the requirement of reporting an attorney’s own errors to the client. According to the court, the “legal duty to disclose such an act, error, or omission serves the purpose of ensuring that a client is able to make an informed decision about how best to proceed under such circumstances.”

Next, the court addressed the implications of the statute of limitation. Of importance was when the malpractice claim accrued (i.e., when did the client know of the malpractice?). The court concluded that it was beyond debate that the attorney had an obligation to inform the client of the error as of the date that the underlying complaint was dismissed, if not sooner. According to the court, the initial act of failing to timely serve the underlying defendant certainly constituted malpractice but, importantly, the court decided that ongoing questions remain as to whether the alleged ongoing tortious conduct in failing to disclose this malpractice supports a separate claim for legal malpractice therefore delaying accrual.

The decision provides an important reminder of our obligations upon discovering a potential breach and the implications upon the applicable statute of limitations. Often, step one must be to notify the carrier and to discuss strategy with defense counsel. There may be coverage implications for admitting fault to a client without consulting with the carrier first. That said, the sooner the client is clearly aware of the issue, the sooner the claim accrues which may provide for a statute of limitations defense down the road.