Law Firm’s Organizational Form, Insolvency Affect Extent of Members’ Personal Liability

Wednesday, March 14, 2012 from ABA/BNA Lawyers’ Manual on Professional Conduct™ By Joan C. Rogers

CHICAGO—Law firms’ switch to limited liability entities can give lawyers a false sense of security about their vicarious liability for claims arising from colleagues’ conduct, according to a panel discussion March 2 at the 11th Annual Legal Malpractice & Risk Management Conference.

In launching the panel on “How Limited Is Your Liability?” moderator Allison D. Rhodes joked darkly that the real topic was “how we get your house.” The speakers focused on a question of keen interest to lawyers everywhere: Under what circumstances can members of a law firm be forced to write checks from their personal accounts to cover liabilities grounded on the activities of others in the firm?

Although lawyers are always liable for their own malpractice, it matters greatly how their firm is organized when it comes to personal liability, Rhodes said, noting that lawyers whose firms are healthy tend not to think about the liability shield and instead see the sad stories as limited to other firms.

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