How Law Firms Can Mitigate Malpractice Risks in Lateral Hiring

How Law Firms Can Mitigate Malpractice Risks in Lateral Hiring

According to a Decipher Investigative Intelligence article by Julie Henson, lateral hiring remains a significant risk for law firms. Malpractice insurers responding to Ames & Gough’s annual report consistently rank it as a top concern alongside cyber risks and fraud. 

The potential for conflicts of interest, lack of required expertise, unethical behavior, and prior malpractice claims are some of the key issues that can lead to significant damage. Henson cites a Decipher Investigative Intelligence survey, which found that 21% of firms reported lateral partners leaving due to client conflicts. In contrast, others faced departures due to ethical concerns or lack of expertise.

Malpractice claims can be financially devastating, with some insurers paying over $100 million. To mitigate these risks, the article says that law firms must take a diligent approach to the lateral hiring process. A well-crafted lateral partner questionnaire (LPQ) is essential for vetting candidates and ensuring full disclosure of prior malpractice claims, lawsuits, and conflicts of interest. Firms should also conduct thorough due diligence, including conflict checks and feedback from clients and colleagues, to uncover potential issues with past work or clients.

In particular, law firms must be vigilant about conflicts of interest, as mergers, acquisitions, and lateral moves increase the risk. Additionally, laterals bringing “bad clients” can expose firms to malpractice claims, disciplinary proceedings, and potential criminal liability. 

By prioritizing comprehensive conflict screens and due diligence, law firms can reduce the risk of collateral damage and safeguard their reputations. Prevention is the most effective way to manage lateral hiring risks through careful vetting and thorough review of a candidate’s background.