Succession Planning: What should you plan for in the event you become disabled?

Last year I received a call from a 38-year-old attorney, Tim (not his real name), who needed my assistance. He told me, “I’ve been in two car accidents in the past eight months and received a traumatic brain injury. My doctor tells me that I need to leave my law practice, at least for a year, so I can better recover from my injury. The stress of practicing law is hindering my recovery.”

Tim had a corporate client where he was collecting on accounts that totaled nearly $7 million, but due to his injury, he was not going to be able to collect. If you met Tim, you wouldn’t think there was any issue. But he knew he was not able to do some things as he had before his accidents. For example, he had trouble functioning well in court because he couldn’t think as quickly as he once had. Eventually, we were able to find a collections law practice where Tim could be “of counsel” so he could receive a portion of the accounts collected. He is still recovering from his injury.

Normal law practice succession planning involves developing a plan for your law practice that will be implemented over the next one to five years. But what about having a plan to deal with issues such as short-term illness, disability, vacations and death? The underlying questions in dealing with these issues include:

• How would the law practice continue operating?

• Who would take care of client needs?

• How would the firm’s staff be taken care of?

The purposes of developing a “law practice continuation arrangement or plan” would be to provide the attorneys, their staff and families peace of mind and preserve practice value if an attorney becomes disabled or dies. Such a plan or arrangement could be a one-on-one agreement with another law practice or mutual coverage for each other for vacations, temporary absences or sale of the practice in the event of long-term disability or death.

If you are managing a law firm, you should have a plan in place if a partner or associate becomes disabled. The plan should outline who will handle that attorney’s clients and matters during a temporary disability or absence. The surviving owners of the law firm have fiduciary duties to the firm’s clients and must legally protect them. This will allow the disabled attorney to focus on recovery. Assuming a recovery, the law firm, in consultation with the disabled attorney, should develop a plan for reintegrating the attorney.

If you are a solo practitioner or if you own a practice with only attorney employees, you should appoint an “attorney surrogate” in case you become disabled. Rule 23, Section 27 of the Rules of Admission and Discipline sets out how to appoint an attorney surrogate and the duties of the attorney surrogate appointed by the lawyer who has died or become disabled. The designation can be made when a solo practitioner or sole owner completes the annual registration using the Clerk of the Courts Portal. In the registration process, the appointing lawyer must certify “that the Attorney Surrogate has agreed to the designation in a writing in possession of both the Lawyer and surrogate.” The designation of the attorney surrogate remains in effect unless revoked by the lawyer or the attorney surrogate. If there is a change in the attorney surrogate, the designating lawyer has 30 days to notify the Clerk of the Supreme Court of such change.

The basis for Indiana’s Attorney Surrogate rule is found in Comment 5 of Rule 1.3 of the Rules of Professional Conduct. It provides, in part:

“To prevent neglect of client matters in the event of a sole practitioner’s death or disability, the duty of diligence may require that each sole practitioner prepare a plan, in conformity with applicable rules, that designates another competent lawyer to review client files, notify each client of the lawyer’s death or disability, and determine whether there is a need for immediate protective action.”

If you haven’t designated an attorney surrogate and you become disabled, one may be appointed for you by a court. The procedure for such an appointment is found in Rule 23, Section 19 of the Rules of Admission and Discipline. The primary problem with this “involuntary” appointment of an attorney surrogate is the delay in discovering your disability and the consequent neglect of client matters. Once your disability is discovered, the Disciplinary Commission should investigate whether you are disabled, and if so, file a petition with a local court and conduct a hearing before there is a determination that you are disabled. If so, the court will appoint an attorney surrogate. By the time all of this has transpired, important deadlines may have passed for your clients’ matters.

Whether you have designated an attorney surrogate of your choosing or the court has appointed one for you, once appointed that attorney serves as a “traffic cop” who is directing the flow of the disabled attorney’s clients’ matters. The attorney surrogate should review the files of the law practice and determine what files need immediate attention and, if necessary, apply for extensions of time. He or she may need to notify the disabled attorney’s clients that it may be best for them to obtain other counsel and arrange for the delivery of their papers and property to the clients or their replacement counsel. Absent intentional wrongdoing, the attorney surrogate is immune from civil suit for damages for all actions and omissions while serving in that capacity. In the process of making client referrals the attorney surrogate may, with the consent of the client, take on representation of that client. However, any immunity from a civil suit protecting the attorney surrogate related to that client is nullified. The attorney surrogate is required to file a final report and accounting of all funds and property coming into the custody of the attorney surrogate with the court. The attorney surrogate is entitled to reasonable fees and expenses if approved by the court.

In the final article of this series, I want to step back and ask the question, “Who is responsible for law practice succession planning?”•

• Don Hopper is founder of Hopper Legal Consulting Services and a partner at Harrison & Moberly LLP. His focus is serving solo and small law firms in developing law practice succession plans that will continue their legal legacies in their Indiana communities. Opinions expressed are those of the author.