Thursday, July 30, 2015

Risk News: Client Success, Conflicts & Insurance

A potpourri of posts to present:

First, today, firms increasingly understand and feel the market pull to focus specifically on client success -- not just delivering the services they've been engaged to perform, but delivering outcomes (and ensuring clients feel understood, advised and well served). This interesting update highlights the intersection of risk into this business equation: "Legal Advice Must Allude to Client's Business Risks" --
  • "Lawyers aren’t business consultants, but they are subject to malpractice liability if they fail to give a client sufficient legal advice about business-related risks to allow the client to make informed business decisions, the U.S. Court of Appeals for the Seventh Circuit held July 7."
  • "The district court did not 'identify any principle of Illinois law that sharply distinguishes between business advice and legal advice,” Easterbrook wrote. “It is hard to see how any such bright line could exist,' he added, 'since one function of a transactions lawyer is to counsel the client how different legal structures carry different levels of risk, and then to draft and negotiate contracts that protect the client's interests.'"
In conflicts news: "CMS hit with "ground breaking" court application to be removed as KPMG lawyers" --
  • "An application has been made to the High Court to have CMS Cameron McKenna removed as the lawyers for two KPMG administrators over allegations that the firm’s role represents a conflict of interest."
  • "The application, made by Hausfeld client property developer Julie Davey, has been stayed by Mr Justice Henderson pending the outcome of Davey’s legal battle with the KPMG administrators, scheduled to be heard in October."
  • "The applicant claims CMS is conflicted in its role as lawyers to the liquidators as the firm is also closely aligned with Lloyds, and that without information barriers in place, information produced by KPMG administrators could be provided to the bank. She alleges this would prejudice any potential conflict with the bank."
Adding some interesting color and commentary on insurance trends: "Law Firms See Insurance as Bulwark Against Data Breach" --
  • "In May, the New York Times obtained and published an article about an internal report at Citigroup that suggested law firms are likely vulnerable targets for hackers, but that it was difficult to tell if data breaches are on the rise or not because there is no regulatory reporting requirement for the legal industry."
  • "'“Our law firm clients report being extorted or threatened with denial of service and being held hostage,' said Mark Greenwood, managing director with Aon Risk Solutions, which sells cyberinsurance to several dozen law firms."
  • "Greenwood declined to disclose which firms had reported a breach, but said the minimum cost of hiring a consultant to identify the hole in a cybersecurity system and to then fix it is $500,000. He further estimated that the largest law firms are paying for $5 million to $40 million in coverage, mid-size firms are purchasing up to $10 million in coverage, and smaller firms are buying  up to $5 million in coverage. The insurance provides firms with a “coach” who can take the lead if a breach occurs, crisis communication and PR specialists, as well as online training and support from IT professionals, according to Greenwood. In the last year alone, his group has signed up 30 new law firms for cyber insurance, he said."

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