Click To Read – PROFESSIONAL LIABILITY UPDATE

Trying To Live In An Ethically Challenged World

Posted on October 1, 2017January 9, 2018 by Tim Soefje

We live in an ethically-challenged world. The every-day pressures of business economics, project deadlines, and client demands conspire against all design professionals every day to drive “professionalism” out of their practices. Design professionals, however, must strive to maintain an ethical practice because quite simply – lives depend on it.

The National Society of Professional Engineers (NSPE) states as its fundamental Canon of Ethics that all engineers shall “hold paramount the safety, health, and welfare of the public.”

And yet, every day, not infrequently with catastrophic consequences in terms of lives and financial costs, some engineers succumb to a corporate culture that tolerates or even promotes placing project economics ahead of an ethical responsibility to the public.

Strong, corporate ethics programs make sense financially. At least one industry consulting group, FMI, calculates clients lose between $5,000 and $50,000 for each million dollars spent on a project. FMI also acknowledges unethical behavior negatively impacts employee morale, project safety, and long-term company reputation.

Some companies have implemented stringent ethics programs to comply with the Federal Acquisition Regulations (FAR). FAR does not set forth any specific requirements or how a company should best implement its ethics program. Any company contemplating federal work should be aware that FAR requires the following minimum:

Within 30 days of being awarded a contract:

Prepare a written code of business ethics and expected conduct, if one does not already exist, and provide it to all employees.
Implement a due diligence program to detect and prevent criminal conduct.
Promote a corporate culture encouraging employees to exercise ethical conduct and comply with the law.
Implement an ongoing ethics awareness and compliance program, including ongoing effective ethics training for employees.
Promote a corporate culture encouraging employees to exercise ethical conduct and comply with the law.
Implement an ongoing ethics awareness and compliance program, including ongoing effective ethics training for employees.
Establishment of an employee business ethics and compliance awareness program and internal system of controls if such program does not already exists.

Within 90 days of being awarded the contract:

Establishment of an employee business ethics and compliance awareness program and internal system of controls if such program does not already exists.
Implementation of an anonymous hotline for reporting improper conduct and specific instructions to employees, encouraging them to make such reports.
Implementation of an anonymous hotline for reporting improper conduct and specific instructions to employees, encouraging them to make such reports.

Any company can implement a strong ethics program once leadership has made a commitment to do so.

The NSPE Code of Ethics provides a clear outline to follow to protect the health, safety and welfare of the general public, and preserve the integrity of the profession. The key to every strong ethics programs should be reinforcement of the basic tenants set forth in the NSPE’s Code of Ethics.

In ever corporate ethics policy, public safety trumps everything. All design professionals must be empowered by their corporate ethics policy to take decisive action to protect the public safety free of public pressure or economic concerns related to a project.

The NSPE, for example, directs an engineer to first report his concerns to the building owner, manufacturer, or other professional to take remedial actions. The engineer, however, must take action to report a safety concern to the appropriate authorities if no action is taken to remedy the situation within a reasonable time by the owner, manufacturer, or other professional. To fail to do so, is an abrogation of the professionals’ fundamental responsibility and obligation.

A corporate ethics policy must empower all employees to strictly adhere to the letter and spirit of all applicable federal, state, and local laws and regulations. A strong ethics policy, however, should clearly advise the design professional that no obligation exists for a professional to become a zealot. The NSPE limits the duty to report to appropriate legal authorities where the engineer’s personal safety concerns are not supported by “scientific consensus” or “widely-accepted engineering standards.” The standard for most policy should be one of acting “reasonably.” The NSPE, however, permits the engineer to decline to perform additional services on the project, and a strong ethics policy should reinforce the professional’s same option.

A corporate ethics policy should encourage design professionals to “stick to their guns” and not yield to the economics of business on issues of public safety. The professional should seek to become the voice of reason on the project. An ethics policy should reinforce that everyone involved in the project that some matters can never be compromised despite the potential costs because the potential risk of loss is simply too great.

The NSPE, for example, acknowledges that fire codes are among the most fundamental requirements for the protection of the public health and safety. An engineer can make no concessions where they believe the public safety is at risk in such circumstances, and must continue to report their concerns up the chain of command if the concern is not resolved.

No design professional should ever feel compelled to work outside their area of competency. Clients and employers rarely want to hear from a professional that another yet professional with a particular expertise must be retained on a project. A good corporate policy however, will remind the professional to not try to become “all things to all people” despite the pressures to avoid costs.

This aspect of any corporate policy can be tricky to implement. Most state licensing agencies identify broad categories rather than sub-specialties. For example, a civil engineer may be highly qualified to prepare plans for a public park, but not possess any specific experience with a particular kind of pedestrian bridge called for by a project design. An engineer should never feel compelled to affix her seal to project plans even if they are obtained from or prepared by some else highly qualified in the field.

No one ever wants to become the company “snitch,” but any valid corporate ethics policy must provide clear directions, and equally clear support, for reporting an impaired colleague. In addition to the public safety concerns, every professional and corporation should fully appreciate the legal liability arising from continuing to permit an impaired design professional to work on a project after any suspicion or knowledge of an impair arises. A decision to ignore or failure to intervene can form the basis of a negligence finding against any professional or corporation who fails to act.

In addition to reporting a colleague, a strong ethics policy must also empower the design professional to report impairment or violations by other contractors and professionals working on adjacent job sit not within the reporting engineer’s immediately control. The NSPE requires the engineer to at minimum report to his immediate supervisor.

In the absence of a state “Good Samaritan Law” that imposes a duty under such circumstances, the design professional likely could not be held liable for a failing to report even where an injury or death occurs. But a design professional who reports such a safety concern because the corporate ethics policy supports his decision to do could prove the key to a successful defense or even the key to avoiding litigation altogether.

Professional excellence can only be maintained by a culture of honesty, integrity and fairness. A strong ethics policy must clearly prohibit employees from conflicts of interest, and impose a duty to make a full disclosure of all potential conflicts to the appropriate company personnel and client. In the event of an apparent conflict, the company should obtain a written waiver from the client.

Conflicts of interest may arise from, but are not limited to, some of the following examples:

Any attempt by employees to use their positions within the company for personal gains.
A professional owns shares in privately-owned companies, which do business with the company. Typically, this prohibition would not apply to shares held in publicly traded companies
A professional’s family member possesses a role as director, partner, shareholder or influential employee in companies or businesses which have any form of business dealings with the company.
A professional accepts gifts from contractors doing business with the company that could place an employee in a position where his independent business judgment may be prejudiced. A strong ethics policy should place clear limits on the types and value of gifts that can be accepted, and require all such gifts to be disclosed.
Any professional’s acceptance of payments, services, loans or bribes from a supplier, contractor, subcontractor or other third parties should be prohibited.
A professional’s acquisition of property acquired as a result of company information.

Once a decision to implement a strong corporate ethics policy has been made and drafted, the real hard work begins. Construction companies and design professional firms notoriously suffer from a disconnect between management and the frontline field personnel. Any corporate ethics policy must be handed down from the top, straight from the board room and president’s office. Otherwise, an ethics policy will never become instilled as part of the “corporate culture.”

A successful ethics policy should be simple and concise. A successful policy will set forth clearly defined procedures and guidelines for an employee to follow when confronted with a uniquely challenging situation, but it is the basic principles loudly endorsed by senior management of “do the right thing” that will prove most effect. Some of the most ethical companies have developed their reputations as a result of generations of employees and senior managers who have never known any other way to do business.

The company must provide ongoing, meaningful ethics training at all levels of the company from employees to supervisors to senior management. No corporate ethics policy can succeed until the rank-and-file employees see first-handed the senior company leadership taking an active leadership role in ethics training sessions, policy initiatives, and implementation.

Every truly effective ethics policy requires a champion at the senior leadership level, who becomes the face and voice of the company’s ethics policy. Every company who leaves even a hint of doubt that senior management does not wholeheartedly endorse long-term, top-to-bottom ethical behavior over short-term business financial decisions has doomed the company ethics policy from the start.

The board of directors must publicly embrace the commitment to ethics. FAR guidelines require continuing board interaction with the company ethics program. An effective ethics policy should be announced by a strong, clearly worded board resolution announcing its implementation. Regular reporting to the board and from the board will signal to every level of the company that the ethics policy is more than “lip service,” but rather an established part of the company’s culture.

Just like professional sports programs talk about bringing in “good character” guys to provide leadership in the locker room, a company must endorse character and ethics as an integral part of the hiring and promotion process. The newest generation of graduates place a high emphasis on going to work for companies with strong values and ethical cultures. Companies who promote long-term ethical behavior will create corporate cultures where they find it easier to hire and retain the best and brightest stars within their companies.

The hallmark of any successful ethics program is self-reporting and an open-door policy. The program must include regular risk assessments, confidential evaluations of management level positions by employees, and even outside, independent audits and reviews.

Many times companies implement successful helplines for employees to call when confront with a uniquely challenging situation. Mentoring programs can be very successful to help develop a corporate culture that fosters ethical behavior in the promotion process. Every corporate ethics program should be constantly evaluated and updated, becoming an integral part of the ongoing business strategies.

Finally, no corporate ethics policy can be successfully implemented without adequate resources devoted to taking action when a situation arises. Internally, senior management must be empowered to take decisive action to protect the interest of both the company and the employee who reported unethical or professional misconduct. The consequences of violations of the policy should be clearly articulated, as should any retaliation against the person reporting, including public reprimands, suspension, and termination.

The company must established guidelines that empower the appropriate individuals within the company to determine whether to retain outside legal counsel to investigate reported unethical or professional misconduct. Typically, outside legal counsel should be retained early in the process, including even before a violation of the policy has been confirmed, to should preserve attorney-client confidentiality of such investigations against future litigation.

Corporate ethics policy will become wide-spread in the next decade as the commitment to ethics increasingly becomes an expected part of the bid process. Like the federal commitment to FAR, private owners are increasingly placing a premium on corporate relationships with any other companies who are viewed as ethical.

Design professional companies can not expect to change their corporate cultural overnight. But a long-term commitment to ethical conduct will pay dividends in the future as the company successfully avoids risk, manages loss, and creates an positive climate to do business with other likeminded companies.

ETHICS POLICY CHECKLIST:

Establish written ethics policy
Adopt an ethics policy resolution by the board of directors
Appoint an ethics omnibusman
Establish a confidential ethics hotline
Establish a confidential ethics helpline
Establish an internal ethics committee
Establish an internal conflicts of interest policy
Implement regular employee ethics training
Establish an internal due diligence process to investigate complaints
Implement an internal ethics compliance program
Establish a pre-existing relationship with qualified legal counsel

To subscribe to the Professional Liability Update, click HERE, provide your contact information, and receive notice of our updates.

Timothy B. Soefje is the Managing Member and head of the professional liability section at the boutique firm of Seltzer │Chadwick │Soefje, PLLC based in Dallas, Texas. For regular information about professional liability matters, follow him on Twitter at @TimSoefje and search #ProfessionalLiability. For more information, visit us at www.realclearcounsel.com or contact him at tsoefje@realclearcounsel.com.

Take Advantage of Contract Review Services To Avoid Costly Claims

Posted on January 18, 2017February 21, 2017 by Tim Soefje

You’ve won that big project. Now, it’s time to sign that big contract. But, you’re a design professional; you’re not a lawyer. What can you do to avoid making a mistake?

In a perfect world, you would be able to avoid all futures claims and lawsuits. Of course, that’s probably not going to happen. But developing well-defined, internal risk management best practices is a good first step.

“Contract management” is the most basic risk management best practice. “Contract management” is the process of systematically and efficiently managing your contracts – from creation to execution – to maximize profits while minimizing risks.

In short, your roles and responsibilities in any project, and the risks and exposures you choose to assume will largely be determined by the contract language.

As result, “Contract Review Services” should be a high priority on every project for every design professional.

This collaborative effort involves both the design professional and an attorney. Outside consultants will work with a risk manager or contract review committee, if you have one, and if you don’t, we can you set one up.

The available Contract Review and Risk Management services are intended to provide best practice recommendations to the design professional.

A typical “Contract Review Report” will highlight as many as 10 different contract provisions, including:

Scope of Services;
Owner’s Obligations;
Billing & Payment Terms;
Schedules;
Termination of the contract should that be necessary;
Consequential damages that can flow from a breach of the contract;
Indemnification, Insurance & Limits of Liability Clauses;
Dispute Resolution should that become necessary;
Certifications, Guarantees & Warranties; and
Copyright and Instruments of Service.

Once completed, the “Contract Review Report” is intended to help the design professional better understand the terms of the contract being negotiated. And more importantly, better understand the risks the design professional is agreeing to assume.

Design professionals always should check with their insurance agent or broker to discuss any questions regarding insurance coverage or compliance with the policy terms when negotiating a contract.

A “Contract Review Report” provides clients the benefit of advice from both a real world business and legal perspective. It provides that “second set of eyes” during the contract negotiating process to minimize, or avoid, future claims and potential lawsuits.

This video is just one in a 10-part series developed to better assist architects, engineers, and design professionals, and anyone involved in the construction industry, to help manage risks and liability on their projects.

To subscribe to the Professional Liability Update, click HERE, provide your contact information, and receive notice of our updates.

Timothy B. Soefje is Managing Member and head of the professional liability section at the boutique firm of Seltzer │Chadwick │Soefje, PLLC. in Dallas, Texas. For regular information about professional liability matters, follow him on Twitter at @TimSoefje. For more information, visit us at www.realclearcounsel.com or contact Mr. Soefje at tsoefje@realclearcounsel.com

The First 5 Things To Know About Your LPL Policy

Posted on February 23, 2016February 21, 2017 by hirschinsurance

Your law firm has made the wise decision to purchase lawyer’s professional liability insurance, or as it’s commonly referred to LPL coverage. Now it’s time to get acquainted with that coverage.

I often hear clients and prospective clients say, “Mr. Hirsch, why do I need to get acquainted with my policy? They’re all the same, or I’m never going to need it.”

After quietly cringing, I usually retort; you wouldn’t purchase a new vehicle without test driving and researching it would you?

The short morale of the story is no two lawyers’ professional liability policies are created the same. They are built by a group of humans usually consisting of lawyers, underwriters, financial gurus and other experienced insurance professionals.

Every insurance carrier has their own experts create their policy form by putting in features they feel will help sell that policy, but make the program profitable.

The important part is knowing some of the important features in the policy so that you can use them when it’s absolutely necessary.

Let’s take a look at my top five features of the typical Lawyer’s Professional Malpractice Insurance policy.

1. Pre-Claims Assistance:

I’ve had numerous clients over the years email me and ask me for advice about a situation, incident or potential claim that has arisen with a lawyer in the firm and whether they should report that as a claim? Here’s my advice to the firm.

First, I’m always going to make sure you refer to your actual policy about what triggers your policy’s claims made coverage. It’s important that you have read the definitions and familiarized yourself with what’s in your policy. You can usually find the Pre-Claims Assistance under the insuring agreement, coverage or supplemental coverage portion of the policy.

The second bit of advice, and something that’s often over looked in professional liability policies, is that almost every reputable carrier selling LPL insurance now offers free risk management hotlines, where the insured law firm can call a 1-800 number and speak with a insurance defense lawyer about your firm’s situation or incident before the actual claims reporting process.

Generally, the insurance carrier hires an outside law firm or will have in-house staff counsel available. These on-call attorneys will give free legal advice about your firm’s situation or potential incident. These defense lawyers are experienced in lawyer’s professional liability attorneys, and more importantly, are familiar with your firm’s LPL policy. Some of these risk management hotlines offer continuing legal education hours for your firm’s lawyers, as well.

There’s a lot of incentive for an insurance carrier to provide this type of pre-claims assistance. The sooner the insurer learns of the client’s problem, the more likely the chance of a better resolution. Even where circumstances later become a claim, early involvement can help mitigate and prevent mistakes that might increase the cost of settling a claim and can create a chain of documentation that assists in the ultimate resolution.

To encourage the use of pre-claims assistance, most insurers do not include expenses related to pre-claims assistance within an insured’s loss history. This eliminates the risk of a premium surcharge for using the service.

Often the expenses the insurer incurs in providing legal or other assistance to resolve a problem get paid out of the policy limits and not subject to a deductible. Please make sure you refer to your policies risk management hotline features to get a full understanding of the features available to your firm.

2. Disciplinary Coverage:

In 2011, the State Bar of California reported 16,156 new complaints against California lawyers. Use this blog as your friendly reminder of the great risk a grievances present to your law firm. They can often be messy and the severity can sometimes resemble a legal malpractice claim in total defense costs.

While it seems fairly straight forward, different LPL policies have different coverage limits and different types of coverage for which they will provide defense costs. Make sure you understand how the limits of the disciplinary hearings coverage work in your policy.

Limits for disciplinary hearings coverage are most often a sub-limit, which does not affect or erode your actual limits of liability of your LPL Policy. However, there is most often a per proceeding limit within that sub-limit and an aggregate limit for total proceedings.

The amount of disciplinary coverage can range from $10,000 – $100,000 depending on the policy and generally not subject to a deductible.

Since it’s likely a reimbursement by the insurance carrier, the law firm sometimes can pick their defense counsel. The reimbursement usually provides for attorney’s fees and reasonable costs, expenses, or fees paid to third parties, resulting from any one disciplinary proceeding.

Pay special attention to the definition of a “disciplinary hearing” in your LPL policy. Definitions often include, but are not limited, to state or federal licensing boards, peer review committees, courts, bar associations, or a regulatory body. You can always find any definition you need clarification on in the definitions portion of the policy. This will lay out exactly who or what is covered.

The very definition might determine whether this coverage would apply to your specific proceeding. One caveat – make sure you follow your policy’s procedure to disclose the grievance proceeding in writing to the carrier. Remember your firm’s LPL policy is the controlling document, so make sure to follow its reporting procedures accordingly. Never deviate or you run the risk of voiding coverage altogether.

3. Punitive & Exemplary Damages:

Punitive or exemplary damages seem to be a very hot button topic in the legal field. Punitive damages are intended to reform or deter the defendant and others from engaging in conduct similar to that which formed the basis of the lawsuit.

The purpose behind punitive damages is to punish the defendant for outrageous misconduct and to deter the defendant and others from similar misbehavior in the future. While some states refuse to award punitive damages in any action and some have limited those damages, they certainly exist.

There has been a significant increase in Fair Debt Collection Practices Act (“FDCPA”) actions against lawyers in recent years. This has become a leading cause of claims in LPL the last few years. It’s important to determine whether your LPL policy covers awards arising under the FDCPA. Make sure to check your state’s laws on punitive damages, as well.

Most older LPL policies exclude punitive and exemplary damages in the definition of damages. Some polices do not specifically exclude coverage for punitive and exemplary damages, however there is no direct language as to whether they are covered in the policy.

You should consult with your broker, if no such language exists in the policy. However, I’m seeing a trend of newer LPL polices including punitive and exemplary damages, where insurable by law, in the definition in order to differentiate that policy form from the others.

It’s an excellent selling point, and these policies do exist because I sell them. You should consult with an expert broker in LPL about finding those particular policies that do include punitive and exemplary damages.

Depending on the types of cases your firm handles this could be a huge difference in covering the type of liability the firm might be exposed to.

4. Mediation Incentive Deductible Clause:

Mediation Incentive Deductible Clauses are a relatively new supplemental coverage or incentive that I’m seeing in LPL policy forms, and it’s certainly a great selling point, if the firm carries a larger deductible.

The mediation incentive clause usually states that if mediation of the claim takes place either without institution of an arbitration proceeding or service of suit, or within a set period of time (ie., 60, 90 or 180 days) of the institution of such proceedings or service of suit, and such claim is ultimately resolved for an amount acceptable to the insured and the insurer by the process of mediation, the insured’s deductible is reduced by (50%) or some other amount.

Generally you can find this clause in the settlement portion of the LPL policy or possibly in the supplemental coverage. The rationale behind offering this clause is that both indemnity and defense costs will be typically lower when claims are settled by mediation, which can save the carrier significant amounts of money in quickly dealing with a variety of LPL claims.

Make sure to carefully review the LPL policy forms under consideration for the broadest provisions that give you the best opportunity to take advantage of this incentive.

5. Extending Reporting Options:

What are extended reporting periods (“ERP’s”) better known as tail coverage? I strongly recommend you get intimately familiar with this provision in your policy.

I often get the following question. “What does the law firm or individual lawyer do when the firm dissolves or the lawyer leaves the firm?” This is where tail coverage comes into play and will ultimately help the firm decide on their next move.

Tail coverage extends the period of time during, which an insured lawyer can report a claim based upon an act or commission that occurred after their retroactive date, if any, and prior to the effective date of the tail coverage. There will always be an extended reporting period option portion of the policy detailing the different options available to the firm.

Remember the firm can only purchase tail coverage through its current insurance carrier, it is not sold, as a stand-alone product.

If the firm dissolves, generally LPL polices offer a 30-60 day period to purchase tail coverage after that policy cancels or expires. Once that window expires you can no longer purchase the tail coverage and the firm can go unprotected from claims that arise later.

In addition, some LPL policies offer individual lawyers the option to purchase tail coverage upon leaving the firm, but I would suggest you review the LPL policy to see, if such a provision exist.

Most, if not all, LPL insurance carriers offer tail coverage for lawyers that retire or cease the private practice of law. Some carriers offer these (retirement or cessation of practice) lifetime tails for free after you have had three years of continuous coverage with that carrier.

Tail coverage pricing is almost always listed in your LPL form under extended reporting coverage. The premium for the tail coverage will depend on the length of the extended reporting period purchased.

Generally, ERP’s are calculated as a multiple of the regular policy premium for that period, (e.g., 100 percent of the annual premium for a 1-year ERP; 175 percent of the annual premium for a 3-year period; or all the way to an unlimited option, although not every carrier has an unlimited ERP option.

When determining the right length of an ERP for your firm, here are my suggestions tp consider.

The most critical factor is the area of law your firm practices. This will determine the types of statute of limitations that may arise in cases the firm handles, which can lead to longer periods for a claim to arise and become known.

How many claims the firm has had in the past might also service as a good measure of the likelihood of a future claim.

Also, consider the firm’s caseload. How many files the firm has handled in past? How many closed files are there in that last 2 or 3 years? This might be a good opportunity for the firm to review its file closing procedures and other firm risk management practices in the wind down.

To subscribe to the Professional Liability Update, click HERE and provide your contact information to receive notice of our updates.

Zachary A. Hirsh, J.D. is the President & CEO of the Hirsch Insurance Brokerage, LLC. Follow Zach on Twitter at @Hirschinsurance. For more information, visit www.hirschinsuranceagency.com, or contact Mr. Hirsch at zach@hirschinsuranceagency.com.

Top 5 Ways Social Media Will Get You Disbarred

Posted on January 17, 2016February 7, 2018 by Tim Soefje

Social media for lawyers has become the legal equivalent of playing with fire. Unfortunately, far too many lawyers and law firms wade into using social media lacking even a cursory understanding of the applicable ethical rules in their jurisdiction.

Here are the Top 5 ways social media can get you disbarred, disciplined or fined.

1. BARRATRY

Ambulance chasing has moved to the internet. A lawyer commits barratry when he solicits professional employment arising out of a particular event or series of events from anyone who has not sought the lawyer’s advice or with whom the lawyer has no family, or past or present attorney-client relationship. A BA Model Rules on Professional Conduct 7.3.

For example, assume a lawyer on Facebook sees an old high school friend post she has just been injured in a car wreck and is being transported to the hospital. Without thinking, the attorney posts: “Praying for you. If you need my help with filing a claim, give me a call.” What likely was a genuine desire to help an old friend has become clear case of barratry.

Imagine a lawyer sees a friend’s tweet expressing frustration about his attorney’s inability to resolve a contested probate matter quickly. The lawyer tweets back: “Sounds to be me like you have a need for speed. #TopGunForHire.” The responding attorney may have only thought he was being cleaver. Unfortunately, he also has committed barratry. The tweet also could subject the lawyer to discipline for communicating with a person the lawyer knows is represented by counsel as discussed further below. ABA Model Rule 4.2.

Lawyers are subject to disbarment or severe discipline for acts of barratry, which also has been a crime in most states for some time. See, Texas Penal Code 38.12. In addition, lawyers who commit barratry are subject to forfeiting their hard-earned attorney fees even after a case is concluded at least in most states.

Recently, some states are enacting laws that create civil causes of actions against the attorney. These barratry statutes typically permit the alleged victim to recover substantial, statutory penalties and an award of attorney fees. See, Texas Government Code, §82.065 et. seq. In Texas at least, a lawyer may not require a client to sign an engagement agreement that waives the client’s right to bring a claim for barratry under the statute. (Texas Opinion 637).

Unfortunately, an entire cottage industry of lawyers filing civil barratry claims now has sprung up in some states. Almost every time, the lawyer has a simultaneous grievance claim filed against him with the state bar.

As these claims grow in number, some members of the defense bar and legal industry analysts are left wondering whether at least some of these civil barratry claims were themselves unlawfully solicited, and in some cases fabricated entirely. Regardless, with tens of thousands of dollars available per claim, lawyer can be assured their social media accounts will be trolled for evidence they have unlawfully solicited anyone who chooses to file one of these civil barratry claims.

2. LACK OF CANDOR TOWARD THE TRIBUNAL

As trial judges and other lawyers become more savvy about social media, unethical lawyers will find themselves held to answer for false statements made to the court or to others. ABA Model Rules 3.3 and 4.1.

For example, a lawyer who chooses to lie to a judge or opposing counsel to obtain a continuance by claiming to be in trial or in a deposition out-of-town in another proceeding should be careful to turn off his Facebook location setting or insure his wife’s Instagram photos don’t reveal his Las Vegas getaway.

As early as 2009, one Texas lawyer learned how dangerous social media can be. The lawyer sought a continuance on the pretext her father had died. The social media savvy judge, however, used the lawyer’s social media accounts to uncover the lawyer had posted photos of herself drinking and partying instead of mourning her father’s death.

3. UNINTENDED ATTORNEY-CLIENT RELATIONSHIP

Social media is about engaging with other people. Lawyers, however, are not like other people.

In general, no lawyer should engage with anyone on social media about a specific legal matter unless the lawyer intends to create an attorney-client, or at minimum a “prospective client” relationship. ABA Model Rule 1.18.

The Restatement (Third) of the Law Governing Lawyers, Section 14 provides a two-part test to create an attorney-client relationship.

First, a person manifests an intent that a lawyer provide legal services. Second, the lawyer either; (a) manifests consent, or (b) fails to manifest lack of consent and knows or reasonably should know the person reasonably relied on the lawyer to provide the services.

All the obligations of the attorney-client relationship such as a duty of competency, confidentiality, competency, and diligence are imposed on an attorney who even unintentionally enters into an attorney-client or “prospective client” relationship. See, ABA Model Rule 1.7. Under ABA Model Rule 1.10, even an inadvertent client relationship can be imputed to the lawyer’s firm.

In other words, an attorney who engages a friend or follower on Facebook or Twitter should follow the same rules that would apply in an in-office setting.

The lawyer should clearly disclaim that any attorney-client relationship exists until an engagement agreement is signed by both parties. Additionally, the lawyer should clearly manifest his lack of consent to an attorney-client relationship after deciding to reject the client.

4. PROHIBITED COMMUNICATIONS

Social media can be a minefield of potential ethical violations for any lawyer who ventures into communications with anyone about a specific legal matter.

Sending a friend request or invitation to connect to the opposing sides of a case for the purpose of obtaining access to the person’s social media content will subject a lawyer to discipline, especially where the lawyer knows the person is represented by counsel. ABA Model Rule 4.2.

Lawyers also should proceed with caution before connecting via social media with a witness in a specific matter. Some jurisdictions require the lawyer to affirmatively disclose to the witness the reason for the lawyer’s attempt to connect via social media.

In other states, the lawyer is prohibited from using false pretenses, dishonesty, or an alias to gain access the other individual’s social media content. Kentucky (Op. KBA E-434), New York City (Op. 2010-2), New York State (Op. 843), and Oregon (Op. 2013-189).

The “real-time” nature of social media subjects uninformed lawyers to unintentionally disclosing confidential client communications. ABA Model Rule 1.9. For example, one lawyer forfeited a substantial settlement when his daughter violated the confidentiality term in a settlement agreement by posting details about the settlement on Facebook.

A public defender was suspended for 60 days after posting on social media that his client may have committed perjury. In re Peshek, M.R. 23794 (Ill. May 18, 2010). Even a nonspecific tweet such as, “just had a client lie on the stand for the first time,” could subject a lawyer to discipline if lawyer’s location or time of the tweet revealed the particular client’s identity.

5. UNAUTHORIZED ADVERTISEMENT

Most lawyers and law firms wouldn’t dream of publishing an advertisement in a newspaper or on television without submitting it to their state bar association for approval. A surprising number of lawyers, however, remain unaware that social media landing pages can be advertisements subject to the local disciplinary rules.

A lawyer’s profiles and home pages on social media sites such as Facebook, Twitter, and LinkedIn can be advertisements where the landing page is generally available to the public. As such, lawyers must comply with their state’s version of the ABA Model Rules 7.1, 7.2, 7.3 and 7.4.

The California state bar concluded that the advertising rules do not come into play if a lawyer’s social media post merely announces a victory or recent publication without suggesting that the lawyer is in the market for new clients. But when a message expresses the lawyer’s willingness to be hired, the advertising rules apply. California (Op. 2012-186).

The California committee concluded that a Facebook post “Case finally over. Unanimous verdict! Celebrating tonight” did not constitute an advertisement because it was not an offer or message about the attorney’s availability for employment. Id.

The panel, however, concluded that when the lawyer posted. “Won a million dollar verdict. Tell your friends to check out my website,” the message asked readers to tell others to look at her website so that they may consider hiring her, and therefore, was subject to the state’s rules on lawyer’s advertising. Id.

Lawyers who chose to use social media for the purpose of advertising must comply with any rules requiring submission of such advertising to any Advertising Review Committee. See, Texas Disciplinary Rules of Professional Conduct, Rule 7.07. Every state’s rules are unique.

The California panel made clear that California lawyers were required to comply regardless of how difficult it may be to comply.

“The restrictions imposed by the professional responsibility rules and standards governing attorney advertising are not relaxed merely because such compliance might be more difficult or awkward in a social media setting.”

California (Op. 2012-186).

Some states, however, have enacted rules that don’t require submitting to an advertising review committee any social media that contains only basic information.

For example, in Texas a lawyer or law firm is not required to submit social media that only includes biographical information, sponsorship of certain activities, or where the communication was not significantly motivated by a desire for, or by the possibility of obtaining, pecuniary gain. Texas Disciplinary Rules of Professional Conduct 7.07(e).

For example, a law firm would not be required to submit their social media posts, encouraging the public to follow their Facebook page, LinkedIn page, or Twitter account.

CONCLUSION

Social media has become pervasive in most lawyers’ every day and professional lives. At least one state’s bar association already has concluded that ABA Model Rule 1.1 requires lawyers to have “a basic knowledge of how social media websites work,” as well as the ability to advise clients about the legal ramifications of using the sites. Pennsylvania (Op. 2014-300).

As a result, best risk management practice suggests that every lawyer and law firm should implement a strong, written social media policy into their firm’s employee handbooks and regularly train their employees on the ethical rules that apply to lawyers and law firms. And, every lawyer should developing a personal, working knowledge of how social media works to avoid the ethical traps waiting for them in cyberspace.

To subscribe to the Professional Liability Update, click HERE and provide your contact information and you’ll receive notice of our updates.

Timothy B. Soefje is Managing Member and head of the professional liability section at the boutique firm of Seltzer │Chadwick │Soefje, PLLC. in Dallas, Texas. He is admitted in both Texas and Oklahoma. Follow him on Twitter at @TimSoefje. For more information, visit at www.realclearcounsel.com or contact Mr. Soefje at tsoefje@realclearcounsel.com

Pathology Of Mistakes And How To Avoid Litigation

Posted on November 19, 2015July 20, 2017 by Tim Soefje

It may come as a surprise that pathologists lose more medical malpractice jury trials than any other single group of medical specialists.

When you consider that a staggering 61 percent of all doctors over the age of 55 report having been subject to at least one claim in their careers, all pathology practice groups and hospitals should consider implementation of effective risk management strategies and training to reduce the risk of claims and maximize the chance of a successful outcome when one does occur.

In fact, according to one study by the Archives of Internal Medicine of all specialties, pathologists also achieved the lowest success rate of obtaining a complete dismissal of claims prior to trial. As a result, pathologists actually go to jury trial on claims filed at a 40-percent higher rate (7.4%) than the national average (4.5%).

The vast majority of pathologist who responded (95.2%) to one study reported having been involved with a pathology error. A surprising 43.6% reported involvement with a serious error; 69.1% reported involvement with a minor error, and 77.6% reported involvement with a near miss. American Journal of Clinical Pathology, 135, 760-765 (2011).

A recent study of anatomic pathologists and clinical laboratory directors found pathologists believed that errors occurred frequently among hospitalized patents. The study found pathologists believe 3% of patients experience a serious error; 12% of patients experience a minor error, and 15% of patients experience a near miss. Id. at 760-765.

Pathologists disagree about the cause of medical errors. The study reported 55.2% believed errors were caused by care delivery systems, and 44.8% believed were caused by individual error. ld. at 760-765.

Despite these percentages, a surprisingly number (24.7%) of pathologists in the study did not know whether a formal error reporting system – such as an incident reporting or patient safety program – existed within their organization. More surprising, 28.2% affirmatively stated they believed no formal hospital reporting system was available to them. Id. at 760-765.

Pathologists face serious consequence when involved in medical errors. The implementation of effective risk management programs and use of pre-claims assistance provided by the pathologist’s insurance carrier can make the difference between a manageable event and a career-ending claim.

To subscribe to the Professional Liability Update, click HERE and provide your contact information and you’ll receive notice of our updates.

Timothy B. Soefje is Managing Member and head of the professional liability section at the boutique firm of Seltzer │Chadwick │Soefje, PLLC. in Dallas, Texas. Follow him on Twitter at @TimSoefje. For more information, visit at www.realclearcounsel.com or contact Mr. Soefje at tsoefje@realclearcounsel.com

Design Professionals Must Prepare Now For The Inevitable

Posted on November 16, 2015July 20, 2017 by Tim Soefje

A wise old lawyer once said: “If you’re not being sued, you’re not making money.”The point he was making was that as a professional’s business grows, it is statistically inevitable litigation will follow.

We partly can blame the rising volume of construction defect lawsuits brought against design professionals on the litigious world in which we live. Design professionals themselves, however, must shoulder some blame as well.

Too many design professionals remain uneducated about the litigation traps they unwittingly create daily on a job site; fail to develop internal policies to mitigate against the risk of suit; and remain unprepared to defend against the inevitable lawsuit when it comes.

A design professional’s legal liability typically flows from the duty to act reasonably with the same skill and care ordinarily exercised by other professionals in their field. A design professional is generally civilly liable only for damages arising from defects in their designs, but the full scope of liability for specific defects in construction or other work by the design professional is typically determined by contract.

How design professionals unwittingly create liability:

Design professionals frequently, however, create liability where none otherwise would exist. Sometimes, design professionals create liability because they are trying to be helpful during the construction process. At other times they create liability because of the conflicting responsibilities imposed by their codes of ethics and professional responsibilities.

For example, the National Society of Professional Engineers (NSPE) Code of Ethics directs engineers to report concerns about building safety to the appropriate individuals or authorities. Ironically, the design professional typically could not be held civilly liable for a failing to report a known design defect or safety hazard, even where an injury or death occurs, unless the state where the events occurred imposes a “Good Samaritan Law” that creates such a duty.

A design professional who fulfills this objection and voluntarily reports a defect or safety hazard could prove the key to a successful defense or even the key to avoiding litigation altogether. Unfortunately, conscientious design professionals attempting to meet their professional responsibilities sometimes unwittingly create liability for construction defect where none would otherwise arise.

Assume a design professional reports a design defect or safety concern to a building owner. In an attempt to be helpful, the design professional voluntarily assumes the role of consultant or adviser to help the owner resolve the potential defect or safety hazard. In such a case, the design professional could be held civilly liable in a subsequent lawsuit brought by the owner or a third party if he fails to act reasonably or breaches the applicable standard of care that results in damages.

For example, assume a sound engineer is retained only to design a theater on the second floor of a building. While inspecting the job site, he observes that the second-floor truss system is improperly designed because splices have not been constructed according to the plans. He reports his concerns to the building owner or general contractor.

The architect, however, goes on to offer his unsolicited opinion the trusses should be fine until repairs can be made or the truss system is replaced. The owner relies on the architect’s opinion to delay taking immediate action. The next week, before repairs can be made, the second-floor collapses, causing substantial property damages and serious bodily injury to several people onsite.

In this circumstance, if the architect would simply have reported his concerns and not offered his opinion the trusses would be okay for a few days, the architect would have fulfilled his professional duties and likely have created no civil liability. In this example, however, the architect can be expected to be sued because he offered his professional opinion the trusses likely would be safe for a few days. As a result, it arguably was reasonable for the owner to rely on that representation to delay taking action to mitigate against the collapse.

In another example, assume the sound engineer goes onsite to inspect the progress, and thereafter, prepares a written report to the owner, noting the second floor is “complete.” The sound engineer recommends the owner move forward with the next phase of the project, including installing the theater seating on the second floor. During construction, the second floor collapses because the trusses were not constructed in accordance with the designs of the truss engineer and were insufficient to hold the additional weight of the seating. People are injured. Litigation will inevitably follow.

A creative plaintiffs’ attorney will argue the owner could reasonably rely on the representations by the sound engineer that the second-floor was “complete” only if the engineer had concluded the truss construction by the contractor and subcontractor was performed in accordance with industry standards and the truss engineer’s plans to adequately hold the weight of the theater seating. In this case, the sound engineer may have unwittingly created liability where none otherwise would have existed because he failed to foresee such liability when preparing his report advising the second-floor was “complete” and his phase of the project was ready to proceed.

Ordinarily, a design professional who approves the work of a contractor that later turns out to have been deficient does not automatically mean the design professional will share liability with the contractor. The design professional, however, likely will be placed in the position of having to explain why the observations and tests he made before approving the work did not uncover the defects.

Every design professional firm should take care to develop internal policies and procedures to mitigate against the risk of creating such legal liability. In our examples above, a careful design professional should have implemented an internal policy that prohibited any design professional from individually offering any onsite opinion or consultations that were outside the scope of the written contract with the design professional’s firm.

Where a design professional is asked to offer such an opinion onsite, a clearly-worded policy could be drafted to require the design professional to obtain express, written authorization from a firm supervisor. The supervisor, in turn, confirms in writing with the owner/contractor the scope and limitations of liability applicable to such an unplanned opinions or consultations that are outside the scope of the original contract and arise only because of the unique situation involving a design defect or safety concern.

What to include in a litigation mitigation policy:

A strong litigation mitigation policy should mandate that every design professional who reports any defect or safety concern should immediately document:

who was told;
what was said;
when it reported;
where the report was made;
why the design professional felt compelled to report, and
how the matter was resolved, including whether the design professional offered any opinion or consultation as to how to resolve the defect or safety hazard.

Every design professional firm would be well-advised to develop a written form for reporting such communication, which is signed by the reporting design professional.

The internal litigation mitigation policy should advise all design professionals to routinely clarify in all external oral or written communication that they are making no representations that can be construed as approval of any work performed by any contractor or subcontractor for which the design professional is not contractually responsible. It may be advisable to draft standard, limitation of representation language to be included in any outgoing emails or correspondence.

While such steps may appear excessive and burdensome, invariably lawsuits seem to turn on the innocuous email or handwritten notation prepared without consideration at the time of how the email or report would be used in subsequent litigation.

Additionally, every design professional firm should develop a litigation response plan. For example, every design professional firm should designate an internal litigation response team comprised of senior members of the firm, who are prepared to act quickly when a situation arises.

Every design firm should develop a strong relationship with an experienced construction litigation counsel who becomes part of such a litigation response team. By directing the investigation, litigation counsel can seek to preserve the attorney client privilege for documents prepared as part of the investigation, communications among employees, and investigations of potential witnesses.

The firm’s litigation response plan also should include a well-defined document retention policy to preserve all emails, correspondence, and documentation that may be available for anyone involved in the incident. Frequently, the preservation of documents only arises as an afterthought once a lawsuit is filed, which may be years after emails and a construction file it lost or destroyed in the ordinary course of business.

Experience litigation counsel also can assist a design professional firm and its professional liability insurer to quickly evaluate the design professional’s potential exposure and possibly help coordinate a plan with other potentially responsible third parties to develop a cost-effective a mitigation plan to reduce the future damages and costs of litigation.

Design professional companies must prepare for the inevitability of litigation through a long-term commitment to ethical conduct; the implementation of ongoing, internal training to educate their employees on the legal pitfalls that confront design professionals every day; and development of strong internal policies and procedures to quickly respond and effectively manage the inevitable litigation that will arise. A well-crafted litigation mitigation and response plan is a positive first step.

The basics of a litigation mitigation plan check list:

Establish written ethics policy;
Internal training to avoid creating unintended legal liability;
Documentation of all external communication with owners, contractors, and subcontractors;
Implement limitation of liability language for all external communications;
Require written supervisor’s approval prior to any design professional offering any advice or consultation outside scope of a written contract;
Develop documentation retention policy;
Designated internal litigation response team of senior design professionals and project leaders;
Establish a pre-existing relationship with qualified legal counsel.

To subscribe to the Professional Liability Update, click HERE and provide your contact information and you’ll receive notice of our updates.

For a quick-tip video on this topic and other issues effecting design professionals, architects and engineers, visit http://admiral-design.omnisure.com/quick-tip-videos/

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How design professionals unwittingly create liability:

What to include in a litigation mitigation policy:

The basics of a litigation mitigation plan check list:

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