Claims for legal malpractice­—when a client threatens legal malpractice but has not yet sued—are becoming more and more common. Although many attorneys take steps to reduce the risk that they will receive such a claim, statistics show that many malpractice claims lack merit as a matter of law. However, being on the receiving end of a claim can be a scary situation.

How an attorney proceeds upon receiving a potential claim can have serious implications on the resolution of the claim as a whole. In fact, sometimes an attorney's response can make it so that a dismissible claim becomes a lawsuit with significant exposure or high costs.

Here are five common mistakes made by attorneys in receiving a malpractice claim, and how to avoid them.

Don't assume it will go away

Although some attorneys may overreact to a potential claim (and increase the likelihood that the claim will proceed to litigation and survive a motion to dismiss or summary judgment), others stick their head in the sand and ignore the issue. This rarely works. If a client believes an attorney has committed malpractice, ignoring the problem may confound the client's emotional interest in seeing the issue through.

Most law firms will engage with such a claim and will not assume it will go away. This usually involves referring the matter to in-house or outside counsel, providing the client with a copy of the file and responding to any questions from the client regarding the representation. If a client has made a claim, it is also important to consider whether notice needs to be provided to the legal malpractice insurance company.

Don't fall on the sword

Sometimes an attorney notices a mistake or error before the client knows about it. In many circumstances, self-reporting mistakes to the client is part of the duty to keep clients informed. However, there is an important distinction between reporting facts material to the representation and admitting liability or legal malpractice.

There are risks for attorneys who are aware of an issue but do not convey it to the client. It can toll the statute of limitation, create facts to support a claim that the attorney put his own interests before the client's and support a bar complaint. It can also create a rift in the relationship with the client that is more likely to lead to litigation. Juries also can be critical of attorneys who hide the ball when it comes to their own errors.

However, not all mistakes are legal malpractice and an attorney can create unnecessary risk by suggesting to a client that any error committed is a violation of the attorney's duty.

There are serious consequences for admitting malpractice when legal malpractice has not yet occurred. Obviously, such an admission would be key evidence during a legal malpractice lawsuit and might concede liability. In addition, it could constitute a violation of the terms of insurance coverage, which typically require an attorney not to make admissions of liability.

In practice, most law firms, when facing an adverse development in a representation, will timely report the issue to the client. The key is to provide just the facts, without conceding the mistake constitutes legal malpractice. There are reported cases where attorneys have admitted to legal malpractice even though no legal malpractice actually existed (because of lack of causation or another issue).

This can be a difficult line to walk, so many attorneys will consult with their in-house counsel or outside counsel before proceeding.

Don't assume that a lawsuit is inevitable

Not all legal malpractice claims become legal malpractice lawsuits. Indeed, clients may threaten a claim for a number of issues, including to avoid paying a bill or because they are unhappy with the ultimate outcome.

Even in those claims that involve an actual attorney error, it is not a foregone conclusion that such a claim will go to litigation. Legal malpractice claims require evidence of proximately caused damage, which can be difficult to prove.

There are other factors that might prevent a client from actually filing a lawsuit. There are some fixed costs associated with litigation. The biggest hesitation for some potential malpractice plaintiffs is that clients who sue their attorneys generally waive all attorney-client privilege protections. California Evidence Code section 958 expressly excludes from the privilege communications relevant to a legal malpractice claim. This typically means everything the client has told the attorney can be disclosed.

Clients must determine a claim is worth the risks and hire counsel to file suit before even filing a claim. After the client hires counsel, the client and the client's legal malpractice attorney must decide that the return on investment is worth the money and time necessary to pursue the lawsuit. And the lawsuit must have some merit to survive early motions practice. Relying on counsel to help navigate these issues is key.

Don't file suit as a tactic

In many instances where a client has threatened a legal malpractice action, the attorney is owed some amount of unpaid fees or expenses. Some attorneys see the threat of an action as an opportunity to get out ahead by filing their own lawsuit against the client first. Those attorneys see it as an opportunity to shape the litigation by being the plaintiff. However, that approach essentially guarantees a legal malpractice claim that otherwise may never have materialized.

Certainly, there may be reasons unique to a particular situation to justify the pre-emptive filing of a lawsuit against a client. However, attorneys considering this course of conduct should give serious considerations to the risks.

Don't offer to settle without the insurer's involvement

Pre-claim settlement discussions are fairly common. There are many advantages to attempting to resolve a malpractice claim without litigation, including to save costs and to maintain confidentiality.

However, most legal malpractice policies will not permit an attorney to make a settlement offer without the insurance company's consent or involvement. Proceeding without the insurer's consent can jeopardize coverage for the entire claim. Because not every claim becomes a lawsuit, the key for an attorney receiving a claim is to avoid making these mistakes, as they do little more than increase the likelihood of a lawsuit.

As published by The Recorder.