Usually, lawyers are the ones bringing legal actions on behalf of their clients. But when conflicts arise, clients can sue for professional negligence or fiduciary duty claims or file complaints with regulators and state bar associations. Direct consequences include damage awards, litigation costs, and negative impacts on future insurance expenses. Indirect consequences include damage to a firm’s reputation, and employee morale. Tightly connected with these client claims risks is the risk of client departures, which can affect current and future business revenues.
Not only are dissatisfied clients more likely to file claims or take their business elsewhere, they are also much less likely to pay their bills. When client relationships disintegrate, future retainers are put in doubt.
- Be selective in which clients you take on. Have protocols in place to help decide which cases to accept, rather than taking everything that comes in the door. Take the time to assess the character of prospective clients.
- Create processes and templates for retainer and disclosure agreements. Clearly identify and communicate the scope of the legal matter, the pros and cons, amount of legal work required, billing procedures, and realistic chances for success. You want to manage expectations right from the start.
- Maintain open communication with your client at all times. This helps to prevent misunderstandings on who is doing what, and what progress is being made on the case. Keep your client apprised of ongoing expenses and be vigilant with progress billing and payment collections.
- Get insurance. At a minimum, it is prudent for any small business to have a Business Owner’s Policy. However, because there are unique risks that come with running a business, law firms would be wise to consider additional coverages.