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Commentary: How to avoid pitfalls of the ‘of-counsel’ relationship

Commentary: How to avoid pitfalls of the ‘of-counsel’ relationship

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Many lawyers and law firms are seeking the benefits of entering into “of-counsel” relationships without paying enough attention to the potential risks.

A lawyer who is of counsel to a firm can get exposure at the same time as pursuing other ventures. It can be a way to stay active in the law while easing into retirement.

For a law firm that engages an of-counsel attorney, the main benefit is that it can market itself as having an expert on hand in a certain practice or geographic area.

State ethics opinions have established loose definitions for the of-counsel relationship.

The term essentially says to the public that the attorney is available to consult on firm matters on an “ongoing and continuous basis,” said Mark Bassingthwaighte, a risk manager with Attorneys Liability Protection Society in Missoula, Mont.

But that means an of-counsel attorney does “need to show up once in a while. It can’t just be a marketing ploy,” he added.

One detriment to being of counsel is that all conflict checks apply, said James Bolan, an ethics attorney in Newton, Mass.

“If the firm is disqualified, you’re going to be disqualified as well,” he said.

The of-counsel relationship can also create malpractice traps.

Many lawyers incorrectly assume their malpractice insurance covers all work they do as a lawyer. But legal malpractice policies usually only cover work performed for clients of the named insured, which is typically the attorney’s own law firm. Therefore, if a solo attorney becomes of counsel to ABC Law Firm and is sued for work he does on behalf of a client of ABC, the attorney is not covered under his own policy because the work was not completed on behalf of a client of his firm.

If two small-firm lawyers become of counsel to each other’s firms, they should be named on each other’s malpractice policy to make sure coverage is provided, Bassingthwaighte said.

Another potential trap is that an of-counsel attorney could be drawn into every malpractice claim against the law firm.

To guard against that risk, an of-counsel lawyer should ask that his or her name be on the firm’s letterhead only for cases where he or she actually performs work, Bassingthwaighte said.

That means if two small-firm lawyers are of counsel to each other’s firms, there should be four sets of letterhead: regular letterhead for each firm that excludes the of-counsel attorney and letterhead for each firm that includes the of-counsel attorney.