Representing a client in litigation often involves the attorney being asked to evaluate the client's likelihood of success and to assign a value to the case. The attorney's analysis may be relied on by the client in determining how to approach the case, whether to settle or take its chances at trial.

Such assessments are often considered to be an art, not a science. The assessment of a client's potential liability or likelihood of recovery can involve a multitude of factors, ranging from an analysis of the applicable legal principles to a consideration of the likely composition of the jury. In the end, the attorney's assessment is generally subjective in weighing the different factors and the strength of each side's arguments.

Inevitably, no matter how carefully the attorney considers the issues, there are times when the outcome or verdict will dramatically differ from the attorney's valuation. In such cases, the clients (or their insurers) may blame the attorneys for not seeing it coming, especially where the client had the opportunity to settle the case prior to trial but failed to do so in reliance upon the attorney's valuation. Thus, there may be a review of how the attorney reached the recommendations or conclusions, and whether it was reasonable.

An outcome that sharply digresses from the recommendation or analysis could lead the client to assert a claim for malpractice. In some instances, it may be that the attorney overlooked a critical legal element or other detail that might have impacted the valuation; in others, the attorney can do everything right, and there can still be an unforeseen outcome.

Below are some of the issues relevant to a determination of whether an attorney's inaccurate valuation could create potential malpractice liability.

The Standard of Care

Although bar rules are not by themselves typically determinative of the applicable standard of care for attorneys in Connecticut, they help shape that standard. The question of whether an attorney might be liable for errors in valuing a claim implicates Rule 1.1 of the Connecticut Rules of Professional Conduct, which requires that an attorney provide a competent representation to a client. Specifically, the comments to Rule 1.1 provide that “competent handling of a particular matter includes inquiry into and analysis of the factual and legal elements of the problem, and use of methods and procedures meeting the standards of competent practitioners. It also includes adequate preparation.”

However, what constitutes the “methods and procedures” of “competent practitioners” could vary based on the customs of the attorneys in the jurisdiction. Thus, many attorneys in this position will thoroughly review the facts and, relying on their experience with similar cases and their analysis of the law, make an educated conclusion regarding the client's likelihood of success.

The Professional Judgment Rule

Attorneys facing a claim based on an inaccurate valuation have another line of defense: the professional judgment rule. The professional judgment rule generally provides that an attorney is not liable for acts or omissions in the conduct of litigation that are based on an honest exercise of professional judgment. Underlying the professional judgment rule is that professionals can vary, reasonably, regarding the appropriate strategy for handling a litigation or specific legal issue.

While the professional judgment rule may provide some comfort to attorneys in valuing claims, the rule generally will not excuse the attorney's failure to thoroughly consider the relevant facts. Indeed, even in jurisdictions applying the professional judgment rule, courts have stated that, to avoid liability, the attorney's judgment should be an informed one. In other words, even if the attorney's conclusion regarding the value of the case is defensible under the circumstances, it will not preclude courts from considering how the attorney reached that conclusion and reviewing whether the attorney's judgment was truly informed.

Accordingly, when providing a valuation, it is helpful for attorneys to articulate the key reasons for the attorney's opinion and the variables that may affect the case. Having this information in writing can act as a shield in the event that the client later questions whether the attorney took adequate steps in considering the client's potential liability.

The Role of Insurers

An attorney's potential liability for an error in a valuation can be complicated where a client's insurer is involved. Insurance policies typically require that the insured obtain the insurer's consent prior to settling a claim and that the insured provide information to the insurer to allow the insurer to assess the risks. When the insurer reviews a potential settlement of a claim against its insured, insurers are generally called to consider whether trying the case instead of settling would place an unreasonable risk of a judgment in excess of the policy limits against the insured.

In such a situation, the insurer may ask defense counsel to prepare a valuation for the insurer's use in determining whether to consent to a settlement. Although the insurer will typically engage in its own independent analysis of the merits of the claim against the insured in order to determine an appropriate settlement value, it will also likely rely on the defense counsel's analysis or, at least, counsel's reporting of facts.

Thus, in the event that an insured is subjected to an unexpected excess judgment, the insured and the insurer may ask questions about whether the excess judgment could have been foreseen by defense counsel or should have been mitigated by the insurer.

Although attorneys are not expected to be able to predict the future absolutely, there still can be some risks for attorneys who fail to give due consideration to their valuation and recommendations provided to a client or an insurer. Otherwise, an attorney may face unnecessary risk in the event that the matter goes belly-up and takes the client by surprise.

Shari L. Klevens is a partner at Dentons and serves on the firm's U.S. board of directors. She represents and advises lawyers and insurers on complex claims, is co-chairwoman of Dentons' global insurance sector team and is co-author of “California Legal Malpractice Law” (2014). 

Alanna G. Clair is a partner at the firm and focuses on professional liability defense. Klevens and Clair are co-authors of “The Lawyer's Handbook: Ethics Compliance and Claim Avoidance.”