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Hey, Legal Malpractice Insurers – How ‘Bout a Little Help to Us Solos?

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Currently, there’s a cross-blog debate raging over the sustainability of the virtual law practice, with Jay Fleishman, Susan Cartier Liebel, Richard Granat of Direct Law (a MyShingle sponsor) and David Bilinsky all weighing in. Take a look at all of the posts to see the wide array of opinions on virtual legal services.

As for me, I’ve always had reservations about the viability of a purely unbundled, forms-based virtual law practice as a stand-alone business model (as opposed to a component of full service firm) primarily because I can’t make the numbers work. When a lawyer’s business portfolio consists of one-off, low cost matters at $300 or $500 a pop, then the only way to make real money is on volume.  And building a  volume practice, whether in the brick-and-mortar world or online requires a serious time or financial investment in marketing – either through paid ads, or persistent blogging, social media use and self-promotion.

Of course, even brick-and-mortar firms had to make these marketing expenditures even before online, non-legal service and DIY providers came on the scene to challenge lawyers’ monopoly.  Now, however, virtual law firms have to combat not just competition from other lawyers but also from online providers.  Up until recently, lawyers marketing virtual online services could claim that they bring to the table a lawyer’s judgment that self-help companies don’t provide. That’s no longer true. Perusing Legal Zoom’s offerings as I frequently do, I noticed that they’ve rolled out various packages that include services from actual lawyers. For example, both the $249 Living Trust or the $69 will include attorney support and an annual legal check-up with a lawyer for an extra $10-$20.

There’s no reason why Legal Zoom won’t continue to grow its legal offerings by contracting with lawyers to provide service to Legal Zoom clients. Moreover, because Legal Zoom has enormous resources, it can out-advertise and potentially outperform a mom-and-pop virtual law firm while undercutting the cost. Yes, it’s true that a solo virtual firm can provide more individualized attention – but they’re going to have to charge more, and there’s no guarantee that the LZ crowd will pay. In many ways, LZ customers are much like those who frequent Walmart. Walmart customers (and I include myself in this category) readily forego the personal touch of the Main Street hardware or pharmacy for rude service or a messy store in exchange for the convenience of being able to buy a wrench or diapers at 11 pm at a fraction of the cost at the mom-and-pop. But if those same customers need to buy a diamond engagement ring, they’ll seek out the personal service of a jewelry store even if it means paying more. Likewise, LZ customers doesn’t care about personal attention or expertise for a will where their only asset is a house or for an LLC when they’ve got $5 in the bank account. But if they need to provide for disposition of $30 million in lottery winnings or prepare for an IPO, they won’t give Legal Zoom – or an unbundled online lawyer – a second glance.

Yet even with these hurdles, lawyers, including those providing unbundled service have two aces in the hole to combat Legal Zoom. The first is our ability to assure client confidentiality, a topic that I discussed here (though confidentiality won’t matter much anymore if our profession’s “thought-leaders” and “innovators” continue to give kudos to idiotic services like Shpoonkle or Law Pivot which invite clients to tell all and in so doing, compromise privilege). And our second defense  is our ability through legal malpractice insurance, to make clients whole if something goes wrong. By contrast, Legal Zoom’s terms of use very explicitly forbid recovery of the types of incidental or consequential damages that might be available through malpractice coverage (e.g., the cost to the client of hiring another attorney).

What’s the best way for lawyers to get the word out about our competitive edge? I suppose all of the solos who compete with Legal Zoom or other non-legal providers can blog until we’re blue speak at Chamber of Commerce and Kiwanis Club meetings and show clients our policy when they come into our offices or online portals. Yet these individual messages, while helpful, are like trying to fend off the hurricane that is Legal Zoom advertising with an ordinary umbrella.

So, I’ve got a better idea. The companies that provide legal malpractice coverage to thousands of solos, earning millions off our premiums (for example, my provider, CNA which I love, had a net income of $126 million for the second quarter of 2011)should sponsor a series of ad campaigns – on radio and TV and online – to combat the Legal Zoom effect. The ads could inform consumers about what legal malpractice insurance is and how it can help them in a way that Legal Zoom and other DIY providers cannot. Malpractice insurers pay thousands of dollars to support bar associations and my guess is that they see very little value from that investment. By supporting a solo campaign against DIY providers, insurance companies will help keep solos in business – which can translate directly into more premiums for the insured.

So how bout it, insurance providers? If you really want to help us solos, this is a powerful way to do it. Who’s on board?

  • This past week I attended the annual meeting of the National Association of Bar Related Insurance Companies (NABRICO) in Asheville. Myself, Erik Mazzone, Tom Grella, Thomas Clay of Altman Weil, and others spoke to this large group of insurance carriers, underwriters and others in the malpractice insurance field about these trends. I had the chance to speak with several of the attendees afterwards, and frankly, many of them are struggling to understand how their insureds are using technology in law practice and what the risks are.  There seemed to be many questions and concerns about the use of social media to communicate with prospective and existing clients online. Learning about virtual law practice and delivering unbundled services online might have been a first for many of the attendees. 

    I think you raise an interesting solution that would increase public awareness of alternative forms of delivery by licensed professionals. From what I’ve seen though, I think the first step will have to be more educational outreach to these malpractice insurance providers so that they have a good idea of what unbundling is and how it can be used in solo practice – whether it’s online or through traditional delivery. I’m not sure how to go about providing that education except for giving presentations to groups like NABRICO when invited. I’ll think optimistically that once they understand these trends and why they are necessary for the survival of many law practices, the providers would be on board promoting the services of their customers. 

  • anonymous

    I can’t imagine that it is not obvious to you the reason that malpractice carriers do not saturate the airwaves reminding people that they have the right to sue lawyers (and their carriers) for malpractice.  I don’t imagine that the majority of the insurance companies’ attorney customers would want them to do so anyway.   I can’t believe that you advocate this in order to help a few bust out lawyers who are so pathetic that they are in competition with Legal Zoom’s $100 contract/will/trademark filing program.  

    Real lawyers should buy LegalZoom, paraphrase its content, and provide it for free on the internet.

    High volume practice doesn’t mean what you think it means.  It doesn’t mean pathetic bust out lawyers charging pennies to compete with software. It means lawyers collecting reasonable  fees (usually at least a few thousand) is small litigation matters (traffic, misdemeanors, divorce, bankruptcy, etc) and then providing efficiency of scale by having a library of the standard motions and by bunching up numerous cases on the same day in court.  

    I prefer sophisticated litigation over high volume mills, but to each his own.

  • Carolyn Elefant

    You raise some good points that I will address in reverse order.
    First, regarding the volume practice, I realize that bankruptcy, DUI and traffic tickets lend themselves to a somewhat higher end volume practice than $250 wills.  In fact, I blogged about one such solo who runs an SEO-driven DUI/small misdemeanor shop in North Carolina and made $160k his first year out.  ( There’s another solo in Virginia who has a fairly high volume traffic practice, and he’s converted at least part of it into a reasonable revenue stream of referral fees – 
    However, the problem with this kind of volume practice that’s not counterbalanced by some higher-reward/higher value matters is that you have to keep feeding the beast.  The solos I described above were fairly early adopters and don’t face much online competition in their respective practice areas.  Even so, once you’re churning cases, it’s hard to make time to market for the bigger fish.  
    The other problem with these types of matters is that eventually, this kind of work is going to be overtaken by companies like Legal Zoom. I didn’t mention it in my post, but LZ already “offers” bankruptcy services.  Essentially, the site quotes a guaranteed flat rate for services in a given jurisdiction and then farms the cases out to LZ attorneys who participate in this marketing venture (it’s clearly labeled as advertising on that part of the site).  In addition to offering rates comparable to, or lower than a standard BK attorney, LZ allows clients to pay in installments — something that few BK attorneys would ever agree to. Moreover, unlike the big box firms of yore (think Hyatt Legal or Jacoby & Meyers), LZ isn’t a law firm so it can raise all the capital it wants to fund its endeavors.  Just as Walmart killed most mom and pops, eventually, these form providers are going to back into offering “branded” Mc-legal services – that will shutter the types of practices you describe.  Not going to happen tomorrow, but surely over the next 10-15 years. For purely virtual firms, it’s going to happen even faster — which is why I laugh about the lawyers who go around proclaiming the innovativeness of the virtual law practice — yes, it is innovative, but but unless you are a very early mover or figure out a way to team up and collaborate with other virtual practices to share costs, you’re going to innovate your way right out of business.
    Regarding your second point about why legal malpractice providers won’t help solos advertise, yes, of course, I’m aware of that limitation (though there might be ways to offer such a campaign without inviting lawsuits). But in part, my post was also tongue-in-cheek — there are so many companies that make money off of solos who should step up to the plate and support us rather than the bar associations.

  • shg

    My first thought is to point (again) what’s wrong with anonymous’ post, but I see no point in starting another prolonged discussion with someone who is afraid to stand behind his comments.  What does disturb me is that My Shingle had long been dedicated to the idea that solos were every bit as competent and ethical as Biglaw, and deserved the same respect.
    Yet comments like anonymous’ suggest the opposite, that solos are practicing gutter law, no concern for clients and do anything for a quick buck.  Is this a reflection of the readers, solos, or what becomes of lawyers in a difficult economy?  Regardless, this strikes me as giving a very bad impression of what lawyers should be, and seems to encourage struggling solos to take the low road.  This isn’t what My Shingle is about, and shouldn’t be promoted as acceptable for any lawyer.
    There have always been bad ways to practice law. Wouldn’t we do better to clearly reject those who suggest that high volume, assembly-line, quick buck practice is acceptable?

  • Jett Hanna

    An insurer here…while anonymous was not polite and made other statements I’d disagree with, they were correct as to why insurers would not support an advertising campaign as suggested. I’ve had the same proposal to advertise the virtues of having legal malpractice insurance from legal malpractice plaintiff lawyers. Indeed, they tried to enlist us in a campaign to require malpractice insurance. We aren’t going to do that. It is up to the regulators to evaluate whether that, or any change to the regulatory structure of the practice of law, is good policy.
    I’ll take exception to Ms. Kimbro’s statement with regard to our company. We have understood the potential for online practice for a long time and don’t have a problem with it. We approved insurance for an insured who was offering online automated wills back in the 90s.
    Sorry it took me 4 years to see this post…nice blog. Ran across this post when researching a related issue.
    Jett Hanna

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