Real Estate Matters Top List of Legal Malpractice Claims: Survey

For the first time since the American Bar Association began conducting surveys of legal malpractice insurance claims beginning in 1985, insurers reported a higher percentage of claims involving real estate than any other area of law.

Real estate, personal injury-plaintiff and family law are the top three areas in the “Profile of Legal Malpractice Claims: 2008-2011,” released by the ABA Standing Committee on Lawyers’ Professional Liability. In all five previous versions of the survey dating to 1985, personal injury-plaintiff matters were number one in generating lawyer malpractice claims.

Eleven member insurers of the National Association of Bar Related Insurance Companies from the United States and nine from Canada contributed data to the study, along with eight commercial insurance companies. Insurers provided data on 53,000 claims for the 2011 study, the most ever.

The prominence of real estate matters in the current survey continues a trend observed in the 2007 study, which revealed an increase in the percentage of claims in that area. Although the report urges caution in drawing conclusions, it says that “it is not surprising” that real estate and collection/bankruptcy have been the source of larger percentages of claims activity in the last several years.

“The authors believe that failed real estate (and other business) transactions likely were the source of increased claims in the 2011 study, but it would be a leap to state that is definitively so based on the data,” the report states.

The study presents data on number of claims by area of law, number of lawyers in the firm, type of activity, disposition of claim, type of alleged error, indemnity dollars paid to claimant and other categories.

The study found that the type of activity most likely to generate claims was “preparation, filing, and transmittal of documents,” retaining its number one position from previous years. “Advice” moved up to become the second-most-likely reported activity to generate claims.

Of the individual errors generating claims in this edition of the study, “failure to file a document–no deadline” showed a steep decline in its share of all errors, dropping from its second-place position in the 2007 study to the bottom third percentage of all individual errors.

Because the study relies on self-reporting only from those legal malpractice insurers that participated in the survey, the authors cautioned that it is not a comprehensive review of all malpractice claims against all lawyers and should not be used by underwriters to determine high- and low-risk practices.

The American Bar Associations’ (ABA) Standing Committee on Lawyers’ Professional Liability is the ABA’s source for information on legal malpractice claim statistics, insurance for lawyers and malpractice prevention information and help.