Health Crisis Continuity Planning for Lawyers and Law Firms
An Unnecessary Tragedy
One afternoon, a sole practitioner was driving home from court. His mind was on his family and the dinner they’d make that evening, or perhaps it was on the good news he’d soon deliver to the two paralegals he employed. The sky might’ve been blue. Rock-n-roll might’ve played from the radio. The details are lost to what happened next.
As the light turned green and the attorney crossed the intersection, his life was stolen in a flash.
A drunk driver had run a red light. He’d crashed into the attorney’s car, killing him on impact.
The attorney’s tragedy, though terrible, was over. The tragedy for his family had just begun.
There was the usual chaos of an unexpected death. A healthy man of only forty, the attorney
had never bought life insurance, and his job had provided most of the family’s income. Atop her
grief and that of her three children, his wife now needed to find a means of supporting herself
and her kids. With no time or legal training, her late husband’s law firm fell by the wayside.
His paralegals needed to take other jobs, and the handful of contract lawyers the attorney had
worked with needed to take other cases. For weeks, the once thriving law practice lay
unmanned and untended before an interim lawyer was hired to distribute active clients to new
homes. Most clients had taken the delay with empathy for the late attorney’’s family and
patience for their own cases.
Others had not.
In the time since the attorney had been killed, a statute of limitations had been missed in the
case of a severely injured client. To make matters worse, the law firm’s malpractice insurance
had lapsed. The aggrieved client sued the attorney’s estate and obtained a significant judgment.
The attorney’s family would receive no assets—salt in a still-bleeding wound.
The attorney had no control over his devastating death. But he could have had control over
what happened after it. His family’s unending tragedy could’ve been forestalled. How?
When business is going well, the last thing you may want to think about is a plan for your law
firm in the event of the unexpected, but it should be the first. Had the late attorney had a formal
continuity plan—or, a sudden health crisis plan—the story his family lived through after his death
could’ve been different. We all know we need personal estate plans in case of an untimely death
or incapacitation. But what about similar plans for our law practices?
What is a sudden health crisis plan?
A health crisis plan is a contingency plan for your law practice in the case of your sudden death or incapacity. At a minimum, it names a designated attorney to step into your practice and provides them written authorization and guidance for how to handle your affairs in your absence.
This guidance can include how you want them to: notify clients, opposing counsel, and the courts of your death or incapacity; review your files and attend to cases; and potentially sell or wind down your practice. It may even name potential buyers for your firm.
Are lawyers required to have a health crisis plan?
While there are only a handful of states that explicitly require lawyers to have a formal plan in place to assist in managing or winding up their law practices upon their death or incapacity, the duty to create such a plan is inherent in the Rules of Professional Conduct. Rule 1.1 requires that lawyers provide competent representation to their clients, rule 1.3 that lawyers act with reasonable diligence in representing their clients, and rule 1.4 that lawyers keep their clients informed of salient information. These rules still hold in the event of your death or incapacity, and the best way to uphold them is to be prepared for the worst possible circumstance. This will keep your clients—and your practice—protected.
If you take these ethical laws seriously, you will make a health crisis plan regardless of whether your state requires it of you or not. Additionally, many malpractice insurers require a contingency plan of some kind or another. A health crisis plan may not be in the letter of the law, but it’s certainly in the law’s spirit.
In addition to the inherent obligation derived from applicable ethics rules, many malpractice insurance carriers require that the lawyers they insure arrange for office closure in the event of the insured lawyer’s death or incapacity.
What are the benefits of having a health crisis plan?
Besides upholding the ethical standards of lawyering, there are three huge reasons to create a health crisis plan for your practice.
1
Protecting your clients: If you are suddenly unable to carry-out your duties as an attorney, you want to make sure your existing clients are not left in a lurch. A sudden health crisis plan ensures that your clients’ matters will not be neglected.
2
Protecting your family: The sudden death of an unprepared lawyer can have an outsized impact on his or her family. Should you pass or become incapacitated with no plan in place, not only will your family be left to pick up the pieces of your practice, but they will also be vulnerable to any number of tribulations, such as the fallout from a possible malpractice suit against you. A health crisis plan can help to mitigate an already troubling time for your loved ones.
3
Protect your law practice: Whether you die or are only incapacitated temporarily, you want to protect the practice you’ve worked so hard to create. Having a health crisis plan will insulate your legacy against liability risk. As a silver lining, your practice will automatically become more organized, efficient, and valuable by virtue of creating a plan—all things you can enjoy alive!
How can Law Firm GC help?
You can create a sudden health crisis plan by yourself, but Law Firm GC understands how difficult it can be to add one more project, especially one so macabre, to an already endless list of to-dos.
We are here to take the pain out of the process by organizing it for you into bite-sized chunks. We keep you on track through what might otherwise be an arduous process, and we make sure nothing falls through the cracks. We want you to have a plan so that you can have peace in your practice.
In addition to walking you through the creation of your health crisis plan, Law Firm GC can serve as your designated attorney should you be at a loss for viable options or merely want to simplify the process. As your partner in the creation of your plan, we will already be in lockstep with how you want your legal practice carried out. Even more importantly, our designated attorney service is non-predatory. We will not poach your clients during your incapacity or try to buy your firm after your death. We will carry-out only what you’ve stipulated in your plan. With Law Firm GC as your designated attorney, you won’t have to worry about attorney-client privilege, confidentiality, fiduciary duties, nor client conflicts. We’re on your team, from start to after the finish.
Sudden Health Crisis Planning FAQ
What is needed in a Lawyer Sudden Health Crisis Plan?
The essence of a lawyer’s Sudden Health Crisis Plan (or is to protect as much as practicable your clients and you and your estate, in the case of your disability, incapacity, or death. There are a number of essential elements in a Sudden Health Crisis Plan. The first involves organizing your law practice and getting it into an efficient state so that someone can more easily step in when needed. The more disorganized your practice, the more difficult it will be for someone to effectively step in.
If you have not already drafted one, an office procedures manual containing systems for certain essential tasks will be needed. The systems include how to produce a list of open client matters, where to look for upcoming deadlines, and how to create and send client invoices. We will help you through the process of creating the core systems need in your Sudden Health Crisis Plan.
The key element of a Sudden Health Crisis Plan is choosing an attorney who can responsibly come in and temporarily manage and/or close your law practice, if the need arises. The responsibility of suddenly stepping into another lawyer’s practice is a heavy one and care needs to be taken that you make an appropriate choice.
As you might expect, there are a number of documents and tasks that will need to be completed to finalize your Sudden Health Crisis Plan. There will be a written agreement with your Designated Attorney. You will need to update your personal estate documents, you will need written instructions to your family, you will need to inform your clients. We will take you through the process step-by-step.
What is a Designated Attorney or Backup Attorney?
Your Designated Attorney is the attorney who will be responsible for and assist in temporarily managing and/or closing your law practice should you become disabled or incapacitated or die. The purpose of a Designated Attorney is not necessarily to step in and take over your practice. Instead, a Designated Attorney is meant to parachute in and triage your practice by quickly reviewing client files; notifying clients, opposing counsel, and tribunals; collecting fees owed; paying creditors; and ultimately transitioning files elsewhere or buying your practice.
How do I find/Who should be my Designated Attorney?
Choosing your Designated Attorney can be a big decision for you. And agreeing to serve as a Designated Attorney is a big responsibility. A fairly common approach involves two trusted attorney colleagues serving as each other’s backup attorney. Whoever you choose, your Designated Attorney should be competent and experienced. He or she should be someone who has the time, willingness, and ability to quickly jump in and manage your law practice. Law Firm GC can serve as your Designated Attorney, if you do not have another attorney in mind.
Can my spouse or adult child be my Designated Attorney?
If your spouse or adult child is a licensed attorney, they may be able to serve as your Designated Attorney. But most states restrict the ability of a non-lawyer to manage or operate a law firm. A non-lawyer who does not work for the law practice should not have access to confidential and potentially sensitive client information.
Who does the Designated Attorney represent?
The Designated Attorney can represent you and your law practice or your clients. Because of fiduciary duties owed, the Designated Attorney may not be able to represent both you and your clients. For example, if the Designated Attorney represents you and your law practice, the Designated Attorney would be prohibited from informing your clients of your potential legal malpractice or ethical violations. But if the Designated Attorney represents your clients and discovers that you committed legal malpractice, then the Designated Attorney would likely have an ethical obligation to inform your clients of your errors.
As you create your Sudden Health Crisis Plan, you will need to decide who you would like your Designated Attorney to represent. This decision will likely be determined, in part, by who you choose to serve as your Designated Attorney. For example, if your Designated Attorney is the person who will be buying your law practice, then it would make sense for that person to represent your clients and not you.
Regardless of who the Designated Attorney represents, potential conflicts of interest may still exist, so the Designated Attorney will need to run a conflicts check to determine if the Designated Attorney is providing legal services to any of your clients at the time the Designated Attorney is required to step in to assist with your law practice. Your Designated Attorney should be prepared to delegate to another attorney any client files with which he or she has a conflict of interest, while preserving the attorney-client privilege and duty of confidentiality.
How does Law Firm GC serve as Designated Attorney?
Many lawyers are not sure who to choose to serve as Designated Attorney. They may not have a viable option or do not want to impose. You should not have this uncertainty prevent you from creating your Sudden Health Crisis Plan. To address this issue, Law Firm GC can step in and be your Designated Attorney. Because we are involved in the creation of your Sudden Health Crisis Plan, we will be more familiar with you and your practice and will likely be more comfortable serving in that role than is another lawyer.
When it serves as Designated Attorney, Law Firm GC represents you and protects your interests. Law Firm GC will never seek to represent your clients or purchase your law practice. So in the case of temporary disability or incapacity, you will never need fear that you do not have a practice to return to because your clients have chosen to stay with Law Firm GC as their attorney. And because Law Firm GC will not have an option to purchase your law practice, there will be no, or minimal, issue regarding attorney-client privilege, confidentiality, fiduciary duties, or client conflicts.
What information will my Designated Attorney need?
Obviously, your Designated Attorney will need to know you have chosen him or her to serve as your Designated Attorney. We have heard instances where backup attorneys had no idea they were named. You will need to familiarize your Designated Attorney with your office, staff, systems, and the various software and technology you use. You will need to provide him or her with a copy of your agreement and accompanying documents.
You will need to have a place where you keep all the essential documents and information that are key to running your law practice, including copies of executed contracts and login and password information. You will need to inform your Designated Attorney of who to seek out and where to look for this information. Keeping all of this information in a colored folder in a fireproof safe may be preferable. You can either share the combination with your Designated Attorney or with your spouse or other trusted person.
How do I compensate my Designated Attorney?
Serving as a Designated Attorney is not an easy undertaking and finding a lawyer who will agree to serve in that role can be a challenge. For that reason, you should expect to compensate your Designated Attorney. Typically, a Designated Attorney will be paid on an hourly basis and will be reimbursed any reasonably necessary out-of-pocket expenses incurred. You will also need to consider the cost of keeping any staff on board to assist the Designated Attorney in any transition.
The funding to compensate your Designated Attorney and staff can come from several different sources. One potential source is from existing funds in the operating account. Another is from funds received from collection outstanding receivables. You can also seed a reserve account solely for the purpose of compensating your Designated Attorney and staff should the need ever arise.
There are also insurance options you can explore. These are probably the best way to go. You may consider purchasing a disability insurance policy in amount sufficient to cover the costs of the Designated Attorney and staff. Business Overhead Expense Insurance may be another available option. This type of insurance covers the ongoing expenses of running your office, in the event of your disability. Lastly, you should consider purchasing a small life insurance policy to be used for the sole purpose of compensating your Designated Attorney and staff for closing your law practice. These policies can be extremely affordable. The policy beneficiary could be your estate, with specific instructions that proceeds be used for the costs of closing your law practice.
What happens if my Designated Attorney is unable to act in that role?
It is possible that your Designated Attorney is unable to serve in that role when the need arises. For example, perhaps your Designated Attorney has become disabled. Or a conflict is discovered with one or more of your clients. To deal with situations like this, best practices call for you to choose a backup or Successor Designated Attorney when building your health crisis plan. If you do not name a Successor Designated Attorney or if he or she is also unable to serve, then the State bar will eventually step in and oversee the transitioning of your clients and the closing of your law practice.
What if my Designated Attorney makes a mistake?
No one is perfect. It is possible that your Designated Attorney might make a mistake when managing or closing your law practice, particularly considering the circumstances into which he or she will be stepping. To encourage a lawyer to serve as your Designated Attorney, you will need to give him or her assurance that they will not be held liable if acting in good faith or merely a mistake. Typically, any agreement with your Designated Attorney will relieve him or her of liability in such a scenario. Your professional negligence insurance will also likely cover your Designated Attorney during the transition period. Your Designated Attorney will, however, be liable to you or your estate for any willful misconduct or gross negligence.
Once my Sudden Health Crisis Plan is in place, can I change it?
Yes, you have the right to revoke, amend, or change the plan and accompanying documents at any time. At a minimum, you should revisit your Sudden Health Crisis Plan annually and make appropriate revisions.
Can my spouse wind up my law practice if my spouse is not a lawyer?
No. If your spouse is not a lawyer, he or she will need assistance from a lawyer to temporarily manage and/or close down your law practice.
How does a Sudden Health Crisis Plan relate to my personal estate planning?
Ideally, in conjunction with the creation of your Sudden Health Crisis Plan, you will update your personal estate documents. You should either revise your will or execute a codicil to your will that directs your personal representative to honor the agreement you have made with your Designated Attorney regarding the temporary management and/or closing of your law practice.
To avoid confusion and enable quick action should the need arise, you should notify your personal representative of your Designated Attorney and review your Sudden Health Crisis Plan with him or her.
If you have not completed your Sudden Health Crisis Plan or have not chosen a Designated Attorney, you should include language in your will that provides guidelines to your executor or personal representative regarding the management or closing of your law practice.
Do I need to notify my insurance carrier of my Sudden Health Crisis Plan and Designated Attorney?
Typically, professional negligence insurance applications ask if you have a backup attorney in place to step in should you become disabled, incapacitated, or die. But you are not necessarily required to notify your carrier of the name of your Designated Attorney.
How often should I revisit or update my Sudden Health Crisis Plan?
You should revisit your Sudden Health Crisis Plan at least once annually. As you know, things change. What is a viable plan one year may not be a viable plan the next. For example, you may have hired a new associate. You may have a new law partner. You may have re-married. You may have revised your will. Your Designated Attorney may have moved across the country or changed careers. You changed software platforms or banks. You have new or different insurance policies. You get the drift.
