Few firms actively monitor risk factors in their employment practices, and instead adopt a crisis management approach using NDAs to keep matters private. Without an open culture and avenues for staff to seek help, harassment and similar problems can easily multiply. To bolster defense to EPL claims, law firms should make training a priority and reinforce management’s zero tolerance policy.

Management Liability. A whole new level of exposure opens up as firms continue to merge for leverage, expansion and improved market position. Historically, only about one in three mergers actually increase per-partner profit, and not meeting partner expectations with a proposed merger can result in claims of negligent due diligence, favoritism in profit sharing, and a host of other costly issues. Mergers can easily falter when cultures clash, creating dissatisfaction and decreased productivity, which eventually gets back to clients—the ultimate arbiters of success.

Management liability insurance for law firms protects partners and shareholders from many of the same liability risks faced by directors and officers of corporations: claims of mismanagement or negligence in the day-to-day operations, partnership agreement and compensation disputes, and claims brought by non-managing partners as well as creditors and vendors, to name a few. From small law firms dealing with vendors to large firms seeking merger and acquisition opportunities, management liability coverage is an important consideration that should not be overlooked.

The shifting challenges looming over law firms today compel managing partners to reevaluate how they do business. Their risk management should evolve from reactionary and minimal to proactive and comprehensive. Working cohesively with a risk advisor can help them sail through turbulent waters and stay on course.

A 35-year veteran, Teena Hostovich is Lockton’s Law Firms Practice Leader and a member of its Executive Committee. She also serves on the Board of Directors of USC Marshall, Los Angeles Philharmonic, and the John F. Kennedy Center for the Performing Arts.

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