Canada Escapes Unscathed As Malpractice Claims Rise In The U.S.

Just because you survived the freeze, doesn’t mean you’ve weathered the storm. Large casualties of the economic recession have been wrought—Lehman Brothers for finance, Howrey LLP for law—but there still remain other threats to your firm.

For example, the next wave of potential devastation comes in the form of malpractice suits.

Legal malpractice claims this year have increased as much as 20 percent for some companies, reports a recent survey by Ames & Gough. The survey polled six insurance companies, who, collectively, provide coverage for roughly three-fourths of America’s largest law firms.

In the survey, real estate practice tops the chart as the most likely cause for malpractice claims. “Conflict of interest” and “failure to file timely” comprise other common reasons to file suit.

“Real estate claims, Ames & Gough notes, have been on the rise for the past three years, thanks to the large volume of transactions that occurred between 2005 and 2008 and the collapse in property values that followed amid the country’s broader financial collapse. The twin forces have prompted many parties to try to recoup real estate losses any way they can, according to Ames & Gough.”

Because real estate was the hardest hit in America’s financial meltdown, companies are eager to blame third-part dealers for the dip in their bottom line. They are equally eager to recover losses in revenue. This means, by whatever means possible.

So, firms who specialize in real estate law will be hardest hit.

Although colder in climate and larger in landmass, it’s ironic that Canada did not experience as much of an economic freeze in the field of law and real estate as its southern neighbor.

Across the border, Canadian firms, as opposed to their American counterparts, are more likely to diversify their law practice. As a result of this diversification, last year, Canadian firms faced less legal troubles, including malpractice suits, according to The Lawyers Weekly.

“”Changes [in the field of law are] forcing firms to be more cost-effective.’ [Scott] Jolliffe [Toronto-based chair and chief executive officer of Gowlings] says that Gowlings does that by having a presence beyond the King-and-Bay core in Toronto.

Its Ottawa, Kitchener, Ont. and Hamilton offices are less expensive to maintain, while each focuses on specific practices of law, including IP in Ottawa, information technology in Kitchener and the Waterloo region and fully-automated commoditization work, such as in the areas of mortgage enforcement and loans recovery at its Hamilton location.”

So what can U.S. firms learn from their northern-most neighbor?

Even if faced by myriad malpractice suits, your firm still has time to diversify its services. If your current payroll is limited, hire one of the thousands of out-of-work attorneys who can offer a new specialty to the firm.

Also, consider relocating. With technology being what it is today, attorneys can be—virtually—anywhere. So, instead of that Madison-Ave office, try Madison, New York.

Finally, don’t be afraid to embrace change. Even if you happen to escape this year’s financially tempestuous weather, it may simply be the eye of the storm.


For more information, read: “Weathering the Great Recession: Canada’s law firms seem sturdy.”


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One response to “Canada Escapes Unscathed As Malpractice Claims Rise In The U.S.

  1. Pingback: Legal Upsets Regarding Fourth Amendment Rights, And Three Ways To Prepare Your Firm For Change |

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