I have an easy and surprisingly somewhat overlooked risk management tip for you. Read your policy. When was the last time you read yours?
I’m always a little bit surprised that when I speak to prospects and clients alike, how many of them tell me they never or very rarely ever read their policy. Look, I know that we are all busy because our reading stack is very high. And after going through the application and quoting, no one is thinking about finishing the process by reading the policy.
Reading your policy is essential to the process and should supplement any risk management technique you utilize in your offices. The policy tells you who’s insured, what’s insured, what you’re supposed to do when and if you do get sued, your coverage limits, your deductible, and how much it actually costs. These are just to name a few.
The policy is also going to tell you what’s not covered, referred to as exclusions in the policy. And perhaps this is even more important than knowing what is covered.
So, don’t ignore my comments and do nothing. Take a moment and read it. You don’t need to become an expert in legal malpractice insurance. Just an informed consumer. A little knowledge in this matter will go a long way in your risk management efforts to avoid legal malpractice.
“Amateurs hack systems, professionals hack people.” – Bruce Schneier
What is social engineering?
Social engineering occurs when somebody acts like something that they’re not to get information from you so they can better themselves. We’ve heard a lot of stories that involve law firms and wire transfer fraud.
Common Social Engineering Schemes Aimed At Attorneys
There was a firm in North Carolina and they received a phone call, supposedly, from the bank saying, “We noticed some interesting activity on your account. I just want to verify we’re talking to the right person, what’s your username and password?” That firm gave the person on the phone their bank username and password. The bank said, “We’re gonna send you a code. We just want to make sure that you are who you are – let us know what the code is and then we’re going to talk about the issues with your account.” So instead, unbeknownst to the law firm, the people on the phone actually signed into their bank, initiated a wire transfer, and sent them the code needed for the wire transfer. So the law firm received the code and provided it to the people on the phone, they put it in, and then they went on to just have a fake conversation about what was wrong with their account. At the end, they said it just turned out to be an internal error and everything was fine. And 30 minutes later, the firm finds out that there was a wire transfer that they didn’t know about that they didn’t authorize. And in fact, it ended up being the person on the phone that allowed it all to happen.
This is a very common thing that we’ve been hearing more and more lately and it is a very common social engineering scheme aimed at attorneys.
Another one is, they’ll call you and appear like they are from a nonprofit, and they’ll try to, again, get some sort of wire transfer normally.
And then the final one that’s really, really common is they’ll send emails to you as your client. So it’s actually quite easy to appear to send an email as somebody else. It’s called email spoofing. An eight year old could do it, it’s so easy. They’ll send emails to you as your client, and they’ll say, “Hey, are you at the office? Can we send a wire out today? I’m busy, just go ahead and do it and email me when it’s done.” Anytime you get anything like that from your clients, you will need to put something in place where there’s some sort of two factor authentication. Something as simple as if they email you, you have to talk to them on the phone before proceeding. Having processes in place to combat social engineering is, again, part of that knowledge that needs to happen.
Social engineering is definitely an issue, and attorneys are one of the main people that they’ll go after because you have access to such important information.
Is This Really Happening?
I can tell you that, obviously, there have been claims, and whether they’re funds, transfer funds, transfers, or just hacks into the system to try to get information such as social security numbers, ein numbers, birth date health records of clients, it’s happening all the time, and it happens everywhere. The smaller law firms that don’t have a ton of money to spend on high priced security systems out there, they’re considered low hanging fruit or as I said, the easy targets for cyber criminals so be careful.
In the past five years, banks have spent about $90 billion on guarding against social engineering. They’re making it a lot harder to get into their information.
Every year, most insured lawyers are asked by their carrier to complete a renewal application. Now, I can hear the collective moans coming from the offices before we even send out the renewal application. I’ll be the first to admit that the applications can be long and contain confusing questions. But keep in mind, this is the only time the carrier can get a complete picture of your firm, you need to take advantage of this.
You need to let the carrier know what your practice is, how your practice is doing, and what you are doing to reduce risk in your office. You do this by answering all of the questions on the application completely. Unanswered questions or incomplete details only cause more questions and increase the back and forth between client and carrier. Take the time to read each question. Don’t assume you know what the carrier is asking for.
There is one question on the application that I think causes concern, or at least causes me concern. And that is the area of practice grid. That’s the chart on the application that you are asked to put a percentage in, in the areas of where your firm is playing. Now, some carriers will ask for that percentage to be listed as a percentage of your time spent. Other carriers will ask for that percentage to be listed as a percentage of the revenue of the firm. Answering that question one way or the other will create a substantially different picture of your firm and definitely have an effect on the premium that you pay.
So please, again, make sure that you’re reading each question and answering those questions completely. You’ll be glad that you did.
Many of our risk management video tips are surrounding the need for early reporting of claims and potential claims. A very important risk management tip. In this same vein, I want to talk about the angry client.
Many insureds have had this situation where a client unexpectedly shows up at the office, or calls you on the phone to express their displeasure about something you did or something that has happened.
Perhaps their case is taking too long. They haven’t heard from you in a few weeks, their phone call wasn’t returned, or they’re just not feeling the love from your office. Don’t just shrug this off as that’s just Joe being Joe, or they just want to blow off steam, or you convince yourself that nothing you did was wrong or incorrect and it’ll blow over.
Unfortunately, many insureds take this approach and find themselves embroiled in a legal malpractice suit down the road. As with any claim or potential claim, report the issue, let the carrier know about it and let them decide if it meets the definition of a claim or potential claim. And if you don’t report it, at least call the malpractice hotline that may be available to you from your carrier. Most insurance carriers do provide a hotline for this type of situation and you would be well advised to use it. It is part of the benefits program of being an insured.
Don’t be the cautionary tale of an unhappy client.
Conflicts of interest have always been a concern to underwriters of legal malpractice insurance. Conflicts come in different shapes and sizes and can oftentimes be difficult to identify. Most attorneys won’t represent both parties in an auto accident or the husband and wife in a divorce matter, but sometimes are quick to jump into a business venture with a client. I don’t know why, but it seems to me that recently, attorneys are more willing to overlook or downplay the serious nature of getting into business with a client.
Whether you want to invest in the client’s business or take an active role in operating the clients business, both are fraught with legal malpractice dangers. Usually, in the end, it’s just not worth the risk or the friendship to be in business with a client. Now, I can’t tell you not to go into business with a client, but I can tell you that if you do decide to do it, make sure you are well aware of the dangers of doing so and review and dissect all of the pros and cons.
Review the insurance policy; how does this affect the insurance coverage? Talk to your insurance broker and other professionals such as your accountant and business consultant and call the legal malpractice hotline of your insurance company. You can discuss the situation with a legal malpractice attorney. This benefit is usually included in the policy for insureds of most insurance companies. Find out all the insurance information good and bad before jumping into business with a client.
Staying current with technology is included in comment eight of 1.1 competence rule. In other words, everyone, I think, is familiar with the 1.1 competence rule of professional conduct that says a lawyer shall provide competent representation to the client. Commenting to that rule 1.1 says to maintain the relevant knowledge and skill, a lawyer should keep abreast of changes in the law and its practice, including benefits and risks associated with relevant technology.
A lot of the issues that come up today that I see are either lawyers’ use of technology as far as utilizing Facebook, Twitter and things like that in their own practice, as well as advising a client as to their use of technology. And there is a pretty good ethics PBA opinion that describes the lawyer’s role with regard to technology and the lawyer’s role in the use of technology on behalf of the lawyer and also representing the client and advising the client on the use of technology.
Meet Scott Eberle
Scott Eberle is on several insurance carriers defense panels. He’s been doing this type of work for many years. In my opinion, he’s one of the best presenters of legal malpractice and how to prevent it. So I think you’re in for a treat in terms of taking back some good information that you can implement in your firms.
“My name is Scott Eberle, I am an attorney at Burns White in Pittsburgh where my practice focuses on representation of professionals, lawsuits and ethics matters. I’m focused on representation of lawyers in legal malpractice lawsuits, as well as ethics issues either in front of the office of disciplinary Council, or just general ethics consultation. I help attorneys navigate the issues that come up in their practice and I’m able to provide guidance on what you need to do to follow the rules of professional conduct to not get yourself in potential trouble with the disciplinary council.”
Scott Eberle is on several insurance carriers defense panels. He’s been doing this type of work for many years. In my opinion, he’s one of the best presenters of legal malpractice and how to prevent it. So I think you’re in for a treat in terms of taking back some good information that you can implement in your firms.
Meet Scott Eberle
“My name is Scott Eberle, I am an attorney at Burns White in Pittsburgh where my practice focuses on representation of professionals, lawsuits and ethics matters. I’m focused on representation of lawyers in legal malpractice lawsuits, as well as ethics issues either in front of the office of disciplinary Council, or just general ethics consultation. I help attorneys navigate the issues that come up in their practice and I’m able to provide guidance on what you need to do to follow the rules of professional conduct to not get yourself in potential trouble with the disciplinary council.”
The technique of adding a signature to a previously signed document is known as countersigning. The agreement between two or more parties is approved by the countersignature. By having a client countersign documents, you have proof that the client received it and they read it.
Just remember, you must look at the engagement letter as a contract between you and the client. It’s a contract that basically says what you’re going to do, and how you’re going to do it. If you must approach that every time, there are some good samples out there that you can get on the internet. Those are great, I think, but I do caution you, I think the best way to effectively utilize an engagement letter is to customize it every time. Because if you’re not customizing the letter, you’re missing out on an opportunity to really limit your potential liability down the road if anything should ever come up.
A common practice amongst professionals, especially attorneys, is the acceptance of board positions on for-profit and not-for-profit entities. And although most of the time the decision to accept these positions is done with all good intentions, it doesn’t mean that there is no exposure related to the acceptance of those positions.
If you’re an attorney, or if you’re any professional, and you’re sitting on a board now or you’re contemplating the acceptance of a board position, I think there’s a couple of things you need to do.
First off, you need to go to that organization and ask them if they have a separate directors and officers policy. If they do, great! Ask them for a copy of that. That way, you can put it in your file, and you’ll know you know the limits that they have to cover you, the deductible if there is any deductible and it’s applicable to you and the policy period so you know when it expires, and when it needs to be renewed.
If the organization comes back to you and says no, that they don’t have a separate D&O policy, I think you need to ask them if they would consider or have they ever considered purchasing a D&O policy. And this is not just for you, the person asking the question. You’re asking for all of the other directors and officers, the employees of the organization, and even sometimes the volunteers of that organization. It’s something that they really need to consider and look at. Secondly, you need to contact your legal malpractice insurance company.
Now, how does accepting a board position affect your coverage? Most policies actually exclude your acts as an officer or director of an outside organization. There is also an ownership interest in most policies that state that if you have any type of ownership, or even if you just own, manage or control an outside entity, your professional services that you provide to them are excluded under the policy.
So there are definitely exposures that can and do arise when you accept a position on a board, be it not-for-profit or for-profit.
My comments are not intended to stop you from accepting any position on any board. My comments here are merely to ask you to take a step back before you accept, ask a couple questions, and make sure you know the exposure that you’re accepting by accepting the board position.
Labor Day is upon us, which means it’s the month of September, which brings us back to the fact that September is Life Insurance Awareness Month. You know, when most people think about life insurance, they’re usually thinking about two different types of policy – either a term life policy, or a whole life insurance policy. Do you know the difference?
Term Life Insurance
My opinion is pretty straightforward and pretty cut and dry. Term Life insurance is just that – it’s only life insurance. You purchase the policy for a certain amount of time, and you have the life insurance for the length of that term, or that amount of time.
Most people consider a term life policy when they’re buying a house. Let’s say you buy a house for about $300,000; you have a 30-year mortgage on it, you then go out and you buy a 30-year term life policy for $300,000. In the unfortunate event that you perish during that term, the $300,000 is paid out, and that goes to pay off the mortgage on the house. There is no cash value at the end of the 30 years.
If you’re fortunate enough to live a long life and you live past that 30-year term, the insurance just ends, and you walk away from the contract.
Whole Life Insurance
Whole Life insurance is a little bit different. Whole life insurance does have a savings component associated with it. Therefore, every time that you pay your premium, a certain amount of that premium will go to pay for the life insurance and a certain amount of that premium will go into an investment vehicle.
At some point during the term of that whole life policy, you’ll start to build up a little bit of a nest egg or a value or sum that you’re able to withdraw from. Some of them allow you to even take a loan against it. Again, in the unfortunate event that you do pass during the term of whole life insurance policy, the life insurance proceeds are in fact paid out.
But again, if you do live that long and happy life, and you live past the term of that whole life insurance policy, you will in fact have a nest egg that you can withdraw or take a loan from and spend any way that you want to.
One thing to keep in mind is that term life insurance policies are usually less expensive than a whole life policy. I hope this little bit of information helps you decide which type of life insurance is best for you.
It’s hard to believe it’s mid-August already. Pretty soon it’ll be September and fall will be here. Speaking of September, I want you to keep in mind that September is life insurance Awareness Month. It gives us all a good chance to sit back and review the changes that have occurred over the past year, and how those changes affect our life insurance coverage.
If you bought a new house, sold a house, had a new baby, maybe your oldest child went to college, or there’s several other situations that could impact the life insurance coverage, but certainly those ones just mentioned really do impact your need for life insurance.
Take a couple of minutes during the month of September and review your situation. If you have any questions with regards to life insurance, give me Don Ivol a call at 412-563-2106. I’ll be happy to review it with you.
In the meantime, don’t forget, take a couple of seconds and enjoy the last couple of weeks of summer. Whether you go golfing, go on vacation, or visit one of our lakes in Pennsylvania like I am. Everybody deserves to enjoy a couple weeks of rest and relaxation.
