Suing clients for unpaid legal fees can cause your attorney malpractice insurance premiums to increase. With admitted insurers as few as 5 client fee suits for unpaid legal fees in a 2-year period causes the insurer to either decline, non-renew your insurance or place restrictive policy exclusions on your policy.
Insurers’ data shows that client fee suits cause legal malpractice claims. Fee suits cause counter claims, cross-complaints, and/or disciplinary complaints. If you sue enough clients eventually, you will have claims. Once a fee suit counter claim(s) is made against a firm, the firm becomes a less desirable legal malpractice risk. Law firms refusing to change fee suit practices will pay higher premiums.
There are the law firms that state; “I understand all that, but I do not like having a legal malpractice insurer telling me how to practice law. Give me an insurer that does not care about suing clients for fees.”
Most insurers that “do not care” about fee suits are non-admitted insurers or insurers that will soon be out of business. Even claims free insureds pay significantly more in insurance premiums for the privilege of suing clients for fees.
“So how do I get paid if I do not sue to collect from clients that refuse to pay?”
Look at your billing practices. Here are simple tips may result in fewer clients not paying fees:
1. Client selection. If the client does not have the resources to pay you, not a client that you want.
2. Client communication. Make sure to communicate with your client, through written and oral progress periodic updates on matters. Treat your clients with dignity and respect. Communicate bad news promptly in person or at the very least by a phone call.
3. Staff communications. Make sure that your staff handles incoming and outgoing communications promptly, communicates clearly and concisely in a respectful manner.
4. Client Retainers. When appropriate ask for the retainer for your services up front. Either for all or a substantial portion of the services.
5. Client Billings. Make sure to keep on top of your billings. Bill promptly, follow-up for past due receivables. If an account becomes past due, communicate with the client to find out why. Do not put off this conversation. Remember with an upset client past due invoices just increase that frustration.
6. Choose your battles carefully. If the balance is small or there are serious issues as to how the services rendered, you may just want to write this one off. Keep your emotions out of it.
7. As a very last resort. Before you sue, if your firm is large enough, a committee should decide which accounts go to suit.
8. If you sue. Wait for the statute on your services to run.
Either because of practice areas or firm philosophy there are law firms that never sue for fees. As far as your attorney malpractice insurer is concerned, zero is the best answer to the fee suits question. Continuing suing clients for fees will cause your legal malpractice insurance premiums to increase as well has having to pay your claims deductible.
Lee Norcross, MBA, CPCU
Managing Director, CEO
(616) 940-1101 Ext. 7080