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A Special Report: The Litigation Tidal Wave (1 of 6)

The litigation tidal wave: The threat is real

It is an accepted fact: Lawyers today practise in an increasingly complex world - a world of new demands, new challenges and new opportunities.

One area of law that's particularly vulnerable to this new world order is the practice of litigation. Forces such as increased consumerism, globalization, ADR and technology are fundamentally changing the face of litigation practice. Some of these same forces are also contributing to a heightened interest in the standard to which lawyers are expected to practise - and a marked increase in claims against litigation lawyers.

In this special report, we examine the impact of some of the key forces that are driving change in litigation practice. We review the types of errors that underlie claims against litigators, from both the statistical and the claims file perspectives, canvassing leading practitioners for their "view from the trenches."

As well, we provide some practical practice management tips which, if followed, can significantly reduce your exposure to a claim and better prepare you for the evolving marketplace.

Statistics tell the story

The first indication of what's happening on the claims front comes from an analysis of statistics. LPIC's rich claims database, which reaches back more than a decade, provides an accurate accounting of past claims activity, both in terms of number of claims reported and claims costs. By slicing that database a number of different ways, we get a compelling picture of what's happening to claims generally, and to specific areas of practice in particular; additional analysis enables us to also identify the type of mistake that led to the claim (e.g. failure to apply a deadline vs. poor communication).

These analyses, coupled with our claims examiners' experiences and anecdotal evidence, also help LPIC identify evolving trends - such as the marked increase in litigation claims over the last few years - and serve as an early warning system that enables LPIC to alert the profession to developing trouble spots. More importantly, it lets us help the profession be proactive in controlling or avoiding claims-prone activities.

The Hard Facts: Litigation Claims exceed Real Estate Claims

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In the late 1980s and throughout the 1990s, real estate claims significantly outpaced claims generated by any other area of practice, both in terms of number of claims reported and claims costs. However, the past two years have seen a significant shift in the area of practice that generates the highest claims count and claims costs, from real estate to litigation. In fact, in 1999, litigation practice represented more risk than did real estate practice.
  • For the period from 1989-98, real estate accounted for 44.9 per cent of LPIC's claims while litigation practice accounted for 35 per cent of LPIC's claims count. In 1999, that trend reversed, with litigation accounting for 43 per cent of all claims reported, while real estate practice accounted for only 32 per cent.

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  • A similar trend exists when examining claims costs. For the period from 1989-98, real estate claims outpaced litigation claims more than two to one, accounting for 52 per cent of claims costs compared to 23 per cent for litigation practice. By 1999, that relationship had reversed, with litigation practice accounting for 38 per cent of claims costs compared to 34 per cent for real estate practice.

Litigation Claims in Detail

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Litigation claims costs rise while overall claims costs fall

The claims experience of litigation practice has deteriorated over the past five years, while the overall claims statistics have improved.

  • Between 1995 and 1999, claims costs in all practice areas generally have fallen about 20 per cent from $75 million to about $60 million, and the number of claims reported each year has held steady at around 2,000.
  • However, in that same period, litigation claims costs increased 63 per cent to $25.7 million from $15.7 million, while the claims count grew eight per cent to 830 claims in 1999 from 769 claims in 1995.

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Litigators generate majority of litigation claims

As this chart indicates, more than 60 per cent of litigation claims arise from litigation- related practice.

  • Lawyers who say plaintiff litigation is their primary area of practice account for 31 per cent of litigation claims reported and 33 per cent of claims costs.
  • Lawyers who give defence litigation as their primary area of practice report 16 per cent of the litigation claims count and 21 per cent of claims costs.
  • Those who practise primarily family law account for 20 per cent of litigation claims reported and 17 per cent of claims costs.

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Specialists - not dabblers - cause the most claims

Based on information provided by lawyers on their 2000 LPIC Liability Insurance Application, we can conclude that those who say they practise primarily litigation generate the majority of litigation claims. On the other hand, lawyers who say they only occasionally engage in litigation practice generate disproportionately fewer claims than one might expect.

  • 43 per cent of lawyers say they spend between 41 and 100 per cent of their time in litigation practice. However, this same group of lawyers generates 76 per cent of the litigation claims reported and 77 per cent of claims costs.
  • At the other extreme, the 42 per cent of lawyers who say they spend 10 per cent or less of their time in litigation-related practice account for only 10 per cent of litigation claims reported and claims costs.

Failure of lawyer/client relationship is a major factor in increased claims

Types of errors that result in litigation claims
35% - Administrative errors re calendaring & procrastination
27% - Breakdown in lawyer/client relationship
23% - Failure to know/apply law/deadline
9% - Inadequate discovery of facts & other substantive errors
3% - Conflicts of interest
2% - Intentional wrongs
1% - Other
Statistics show that lawyers engaged in litigation practice continue to make many of the same errors made in the past.

Limitation period issues because of poor calendaring; procrastination; and failure to know and/or apply a deadline, account for the majority of errors that lead to litigation- related claims.

But coming in second, and gaining ground according to both our claims examiners and lawyers in the trenches, are claims that arise from the broad category of a breakdown in the lawyer/client relationship.

Underlying these kinds of claims are issues such as:

  • Failure to follow instructions;
  • Poor communication with the client; and
  • Overall dissatisfaction on the part of the client with the relationship.


Understanding claims terminology
Claims Count: Claims Count refers to the number of new claims reported to LPIC in a period, either in total or in a specific area of practice. In each of the last three years, the total claims count has held steady at around 2,000 new claims reported each year.

Claims Costs: Claims Costs refers to the gross costs of resolving claims reported to LPIC. Gross claims costs includes any payments made by LPIC to repair and/or resolve the claim, including any defence, investigation and adjuster costs incurred, and any indemnity payments made on a claim.

Litigation claims: In examining litigation trends, LPIC has defined litigation claims as claims arising from the litigation activities of the following areas of practice: civil litigation (plaintiff litigation and defense litigation); family law; and criminal law.


Key DatesMore

January 31, 2015
Real estate and civil litigation transaction levies and forms are due for the quarter ended December 31, 2014.


 

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