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Professional Liability Update

The information below is a continuation of our Professional Liability Update newsletter, Managing Fee Suits to Minimize Professional Liability Risk .

The The Cost/Benefit Analysis: What to Consider Before Filing a Fee Suit

While the proactive revenue management methods we've discussed can help your firm avoid fee suits, you may still be faced with a situation where you may be inclined to pursue a client for outstanding fees.

There are several questions you should consider before initiating a fee suit: 

• How well will your performance stand up against a malpractice counterclaim? Assess your odds of winning and adjust the amount you are seeking to recover accordingly. If your odds are 80%, reduce the amount owed by 20% and re-evaluate whether it is worth pursuing.
  
  
• If you believe it is still worth pursuing, re-evaluate the reasonableness of the fees you are seeking to recover. You cannot recover excessive fees, including in contingency situations. Reduce the amount accordingly.
  
  
• Still think it is worth it? Deduct legal fees and the value of your time and that of others that will be spent pursuing the action and - most likely - defending a counterclaim. Keep in mind that your professional liability insurance may NOT cover the costs of a counterclaim defense.
  
  
• Still want to sue? If you are seeking to recover fees and not expenses, deduct the appropriate percentage for taxes.
  
  
• Still want to sue? Deduct damage to public relations and good will.
  
  
• Still want to sue? Remembering that the reason clients do not pay is often because they cannot pay, deduct any amount likely to be uncollectible.