The Risk Manager, Summer 2003

The Risk: A few law firms handle a large volume of foreclosure suits in Kentucky. Rather than appear at foreclosure sales, these firms employ local lawyers to appear and bid on their behalf -- usually for a fee of $100. They make malpractice claims against local lawyers if the sale is missed, the bid is not in exact accordance with instructions, or the representation is in any way unsatisfactory. Damages claimed are the fair market value of the property determined by the amount the client was willing to bid.

Malpractice Avoidance: The fee of the local lawyer is small and the malpractice exposure large. Is a $100 fee worth the risk of suffering a malpractice claim and paying a deductible of several thousand dollars – or is this business better avoided?

Malpractice Prevention: Docket carefully. Have at least a dual calendaring system (manual or computer) with your secretary keeping a matched calendar. Establish a third party tickler system as an additional safeguard. Calendar all critical dates with adequate lead times for preparation. Conduct a personal, monthly review of all foreclosure sales matters.