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ISBA seeks malpractice time-limit legislation

December 3, 2014

The Indiana State Bar Association is proposing limits on the period of time an attorney may face malpractice actions for professional services.

A proposal adopted by the ISBA’s House of Delegates in October has yet to be formalized, but it recommends legislation that would limit malpractice liability for attorneys to two years after discovery of an error or not more than three years after the conclusion of representation, said Robert M. Hamlett, an Indianapolis attorney who worked on the draft legislation.

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“It has been presented to several legislators to see if they would introduce it” in the upcoming session of the Indiana General Assembly, Hamlett said. State bar officials said a final version of the proposal has not yet been certified from the House of Delegates.

Hamlett and other attorneys said recent court opinions have raised the possibility that lawyers could be held liable for malpractice decades after they represented a client. He said the possibility has raised concern that lawyers might have to carry “tail” malpractice insurance for the rest of their lives after leaving practice.

“That’s an unreasonable expectation to me,” he said. “A lot of other attorneys have said the same thing.”

Hamlett cited a recent Indiana Court of Appeals decision as one that caught his attention and raised the possibility of seeking a statutory time limit on legal malpractice, much like the statute of repose and limitations that accountants enjoy under Indiana Code 25-2.1-15.

In October 2013, a divided panel of the Court of Appeals reversed summary judgment in favor of an attorney in a legal malpractice case arising from errors in the handling of a will. In that case, Martha Ferguson et al. v. Berton O’Bryan, 49A02-1211-CT-917, the panel majority ruled attorney Berton O’Bryan owed a duty to relatives who had been included on a list of bequests that had not been filed with the probate court when a final will had been executed and filed in December 2007.

The beneficiaries filed the malpractice suit in 2010, and Judge Terry Crone wrote for the appeals panel majority that reversed summary judgment entered by the trial court in favor of O’Bryan. “To hold that O’Bryan did not owe the Relatives a duty in this situation would immunize and thus encourage even more egregious acts of malpractice,” Crone wrote.

But in dissent, Judge Ezra Friedlander said summary judgment should have been affirmed because intended beneficiaries weren’t known to the attorney at the time the will was drafted. “The Relatives essentially argue that we should retroactively expand the class of individuals to whom a will-drafting attorney owes a duty based upon knowledge the attorney might subsequently obtain,” he wrote.

The Indiana Supreme Court declined to grant transfer, and the case was settled after it was remanded to the trial court.

ISBA President Jeff Hawkins said the proposal to limit the timeframe for malpractice was developed by the bar’s probate, trust and real property section, driven in part by difficulties retiring lawyers face planning for potential liability. “Their eyes were bulging when they find out how difficult it would be to get potential liability coverage for the rest of their lives,” Hawkins said.

“They found they could not be responsible enough. The insurance industry didn’t have a solution to address a potentially open-ended responsibility.”

Hawkins said the bar saw a good analogy with the statute for accountants. Still, he said, the proposal got a rigorous hearing before it was approved.

“It was probably one of the more heavily vetted things” in the House of Delegates, Hawkins said. “People were concerned. We want to make sure this is consistent with our commitment to the administration of justice and protecting clients. … It was not a freight train at all.”

South Bend attorney Richard Urda Jr. helped draft the proposal. Also licensed in Michigan, Urda looked to the Wolverine State’s statute of repose for lawyers enacted last year as a model for a possible Indiana statute. Michigan’s statute imposes a two-year time limit on malpractice, but it also allows claims after that period within six months of the time a client discovers or should have discovered the claim. Michigan already had statutes of repose for the professional services of doctors, architects and engineers.

“At this point there is no certainty” for lawyers regarding time limits on malpractice claims, Urda said.

There is no requirement for Indiana attorneys to carry malpractice coverage unless they are organized as a professional corporation, limited liability corporation, or other entity that specifically requires such insurance. Most commonly, malpractice coverage is written as “claims made” policies, though some insurers also offer professional liability based on dates of occurrence of alleged acts of malpractice.

Urda said the issue of liability long after practice is especially significant for estate attorneys. “You could have something well down the stream arise,” he said. “You may do work and it may not be clear people think you made a mistake until after the client has died.”

He explained that attorneys may face claims for liability when clients haven’t made adjustments to estate plans after changes in their lives have occurred. “They don’t always rush back in and update it,” he said.

Urda said the bar proposal aims to bring some certainty for lawyers about their risk after leaving the profession, but without harming clients.

“I believe that what is being proposed is trying to strike a fair balance between the interests of the bar and the interests of the public that we serve,” Urda said.•

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