On Law

October 29, 2002

December 3, 2002

January 14, 2003

Don't overlook liabilities that accompany a lateral or new hire

How can hiring a new associate or partner be detrimental to the firm? When hiring a new attorney, law firms should take in consideration the impact the new hire will have on its professional liability insurance. A common mistake made by law firms is to overlook the liabilities that accompany new partners and new hires.

For example, having an attorney who has had claims filed against him or her may impact the way the firm's current carrier underwrites the risk at renewal. Although the claim has nothing to do with your firm it becomes part of your application and therefore potentially impacting the carriers pricing.

Another issue is the practice specialty of the new attorney. How will this area of practice, if new to the firm, be perceived by your carrier? Undesirable practice areas can mean higher premiums or even a non-renewal.

How do you target potential problems and avoid claims?

When seeking new employees, make sure to carefully evaluate new prospects through the following:

  • Ask all prospects to list all claims made against their practices in the past. Another suggestion is to ask them hire to sign a declaration of whether they have knowledge of any incidents that may perpetuate a claim. The firm should then ensure that prior coverage is in place for those incidents.

  • Check prospects' background using their resumes as well as personal references. Look for obvious problems and characteristics that are not in line with the standards of your firm or practice.

  • Interview colleagues, including fellow attorneys and support staff with whom the prospective employee has worked. This will help you to obtain an inner view of the new hire's work ethic and standards.

  • Explore prospects' reasons for leaving their prior firm or private practice.

  • Check with the local Bar Association regarding possible disciplinary actions against candidates.

  • Research the possibility that they have a criminal history and determine the ramifications it may or may not have on the firm.

  • Make inquires regarding the candidate's personal financial statements. This often can indicate if attorneys have financial problems that could affect, or may have affected, their practicing law.

  • Request official law school transcripts and certificates of bar admission and good standing as a prerequisite for employment.

  • Analyze attorneys' professional financial history, including billable/non-billable hours and revenues, including write-offs.

  • Ask for a detailed list of the attorney's former and current clients, including descriptions of the services rendered. This will help avoid any conflicts should you decide to hire the candidate.

  • Discuss the prospects' philosophy about new clients, conflicts of interest, practice management controls and teamwork. Communicate to the prospect your firm's philosophy on these issues

  • Determine their support staff expectations and requirements, and whether they fit with your firm's corporate culture, i.e., computer literate and self sufficient versus heavily dependent on staff.

  • Communicate the firm's expectations regarding reporting structure, participation in management, professional growth, compensation and pro bono work, as well as the firm's philosophy on new client development.

  • Lastly, compile a written synopsis of all-potential liability risks the prospect would possibly bring to your firm, based on the information gathered in the aforementioned steps. The synopsis should then be presented to all principals or partners in your firm to review since they will share the risks.

    Although the prospect of additional revenue or the ability to expand one practice are can be very attractive -- remember it may come at a price as respect to professional liability insurance.

    Ahern, RPLU, is the president of Ahern Insurance Brokerage. He can be contacted at brian.ahern@sddt.com.

  • October 29, 2002

    December 3, 2002

    January 14, 2003