Recently Closed Claims’ Lessons October 2019
Post on October 18th, 2019
OBLIC paid approximately $315,545 to resolve 7 claims that were closed last month.
Payments included loss payments, such as judgments awarded or settlement payments, and the attorneys’ fees and costs OBLIC paid to defend its insureds.
This is part of a continuing monthly series providing information on recently closed claims.
We will provide claim statistics on the areas of practice in which the act, error or omission occurred and generalized information on the cause of recently closed claims. Our intention with this series is to demonstrate the value that we provide to you, our insureds, through the experiences we have had with our other insureds and make you aware of the common areas of risk and ways to avoid similar claims in the future.
Hopefully, by seeing where your colleagues may have taken a step in error, you will know where to be cautious!
Recently Closed Claims by Area of Practice and Alleged Cause of the Claim:
- Collections – Insured was directed by collection agency, holding itself out as an out-of-state law firm, to collect against personal property of Debtor. Debtor filed malicious prosecution action against Insured alleging that judgment being executed upon was not against Debtor personally but solely against a defunct corporate entity.
- Commercial Matter – Insured set-up an LLC entity for founders of company. One founder surrendered equity interest in company due to bad personal credit that was making it difficult for company to obtain necessary loans. Value of company increased a decade later and founder who surrendered equity interest alleged he was entitled to 50% of the increased value despite surrendering his equity. Founder also alleged that Insured did not adequately represented by Insured during surrender.
- Probate, Estates & Trust – Insured appointed as administrator of estate where sole asset was a condominium unit that was half owned by the decedent’s sibling. Insured reimbursed the sibling for half of real estate taxes he paid for the entire property upon its sale. Children of decedent filed action against Insured and bona fide purchaser alleging fraud by Insured in inducing them to approve payments for real estate taxes and seeking to undo the sale to retain the property themselves.
- Probate, Estates & Trust – Insured drafted an irrevocable trust for the purposes of Medicaid planning that was to be funded with shares from an s-corp entity. Language of trust allegedly failed to include IRS requirements to maintain s-corp status, thus, shares were deemed converted to c-corp.
- Probate, Estates & Trust – Allegation that Insured, as part of an estate plan, drafted several deeds and transfer-on-death affidavits for client’s sons while client was incompetent.
- Probate, Estates & Trust – Insured who was handling an estate allegedly failed to timely advise the beneficiaries to remove items from decedent’s storage unit before it was sold by storage company.
- Real Estate – Insured allegedly missed an Open-Ended Mortgage (Secured Personal Credit Line) on real estate when preparing a Certificate of Title for purchasers of property in 2008. When the purchasers sought to sell the property, the mortgage was discovered by subsequent title examination in 2019.
Who is your client?
We often ask that question in terms of identifying conflicts of interest and to whom the duty of confidentiality is owed. However, the closed claims last month illustrate the true breadth of this question.
In the collection action noted above, the collection agency that engaged our Insured held themselves out as out-of-state lawyers seeking an Ohio lawyer to execute on a judgment previously obtained. They directed the steps and action for the Insured but when the debtor started fighting back against the allegedly improper collection action, all fingers immediately pointed to our Insured who was the only actual lawyer involved. When contacted by a new client, ask the question, who is this client? At worst, you get to know a new client a little better, at best, you could avoid fraud.
Letters to non-clients advising that they are not clients at the outset of a matter can save YOU years of litigation. As illustrated by several of the closed claims above, where multiple parties are involved in a transaction, but you are only intending to represent a single person or entity, write a letter or send an email, and document this explicitly. Let the parties know that you only are representing your chosen client in the matter and are not representing the “exiting” business partner, or the second wife, or the client’s sons. Protect yourself. The letter won’t prevent a complaint filed against you by the upset beneficiaries who believed you represented them, but it should prevent it from dragging on for years and years.
Let all parties to the transaction know who is your client.
Cause of Claim does not mean that the claim was meritorious or that there were any damages arising from the alleged breach of the standard of care. The alleged cause is the brief summation of the allegation made by the claimant as to the error allegedly made by our insured.
There are lessons even to be learned from those claims in which liability is heavily contested.
In addition to the Recently Closed Claims noted above, we also closed one disciplinary matter last month.
Disciplinary coverage is separate and apart from the coverage available for “Claims” and is not included in the totals noted above. All OBLIC Legal Professional Liability Policies provide an additional limited legal fee and expense coverage for disciplinary actions. The coverage is designed to reimburse you for the expenses for legal services charged by a lawyer to defend you.
See XIV. LIMITED LEGAL FEE AND EXPENSE COVERAGE FOR DISCIPLINARY ACTIONS in your policy for the terms and conditions of the disciplinary coverage.
Please contact me at email@example.com if you have any questions!
Carl Marsh, Esq.
Ohio Bar Liability Insurance Company