The best evidence of the increased concern over use of letters of engagement (LOE) by lawyers is that two sessions of the recent ABA Spring Legal Malpractice Conference were devoted to that issue. Insurers and risk managers are up in arms over lawyers’ inconsistent use and down right neglect of LOEs. The concern centered on legal malpractice liability and stricter underwriting standards — both with premium increase implications. This development suggests that this is a good time to offer an analysis of the issue with some risk management guidance.
Why Don’t Lawyers Routinely Use LOEs?
Why They Should!
The ABA Conference and the 2011 Legal Malpractice & Risk Management Conference offered these examples of why many lawyers fail to use LOEs and why they should:
Don’t use because:
Should use because:
Letters of Engagement
The first risk management action that should be taken with every new matter after a conflict of interest check is the preparation of a comprehensive letter of engagement including fee terms and conditions. Many lawyers confuse a fee agreement with an LOE. A fee agreement standing alone is not an LOE – it accomplishes few of the purposes or protections of a thorough LOE.
The following checklist identifies key considerations in tailoring a comprehensive LOE for a new matter:
* This list is a composite derived from several sources to include Legal Malpractice 2009 Edition, § 2:10 and the Minnesota Lawyers Mutual Insurance Company.
Sample LOEs are available on Lawyers Mutual’s Website at lmick.com – click on Resources (do not click on the drop down menu) and then on the listed LOEs.
Risk Management Procedures for Implementing
Many firms have a policy to use LOEs in all representations, but many are also inconsistent in following this policy. At the ABA Conference the following compliance procedures were recommended:
At the 2011 Legal Malpractice & Risk Management Conference it was recommended to send LOEs by email because it is easier that way to get acknowledgement and return. Be sure to diary this email procedure to assure that acknowledgment is received and saved. Instruct the client to print the LOE, sign it, and mail it back. Make sure that the signed copy is received.
Should a Lawyer Always Have a Client Countersign an LOE?
Kentucky does not have a rule requiring that clients countersign all LOEs. Kentucky Rule of Professional Conduct 1.5, Fees, (c) does require that a contingency fee agreement be in a writing signed by the client. Therefore, a lawyer must obtain a client’s signature on an LOE that includes a contingency fee agreement.
Notwithstanding this limited requirement, good risk management means using an LOE in every matter and having it countersigned by the client. Be leery of sudden emergency matters when the client insists on immediate service without a LOE. The tendency is to not follow up with an LOE when time permits. This can lead to serious misunderstandings between lawyer and client.
Don’t Overlook the Other Engagement Letters – “Dis” And “Non”
Space does not permit a detailed analysis of disengagement and non-engagement letters. Our long-standing risk management advice on their use follows:
Whenever possible withdrawal should be a clean break – a clear-cut decision with the client’s agreement in writing. Use a disengagement letter that:
After sending the disengagement letter, carefully follow through on the duty to take necessary actions to protect the client’s interest and comply with the representations in the disengagement letter. This avoids a malpractice claim over the manner of withdrawal.
Finally, a complete copy of the file should be retained. A disengaged client or one that terminated you has a high potential to be a malpractice claimant. The first line of defense is a complete file with a comprehensive disengagement letter. This is the best evidence for showing competent and ethical practice in disengaging a client.
Always use letters of non-engagement for declined representations. They are best sent by certified mail, return receipt requested. A former prospective client with a complaint or claim “never” receives a non-engagement letter sent by regular mail. A typical letter: