One of the biggest risks facing law firms is a significant legal malpractice claim. While claim numbers have remained relatively stable, the size of claims—measured by how much the former clients seek in damages—has exploded. It is not uncommon to see eight-, nine-, or even 10-figure damages claims. In addition to the financial risk, these claims carry reputational risk, make lateral hiring tricky, and can take a psychic toll on otherwise-thriving attorneys.
Transactions generally pose a bigger risk of malpractice claims than litigation for two reasons. First, any given deal is generally larger than any given piece of litigation. Second, causation in transactional malpractice cases tends to be more straightforward than in litigation where it’s necessary for the plaintiff to show both the error and that they would have won.