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Look critically at who’s giving advice

At a Westside Governance debate, when amalgamation of the Westside with Kelowna was being considered, one of the panellists suggested that we look critically at the advice we were receiving from various people and organizations.  He suggested that we consider that advice in light of the way those people and organizations might benefit from the decisions they are trying to influence.

What an excellent suggestion.

How much weight can you give to advice from a person in the pro-amalgamation camp if that person stands to benefit from amalgamation?  So as not to be one-sided, how much weight can you give to advice from an incorporation supporter if that person would benefit from incorporation?

Is the person giving you advice trying to benefit you, or is he or she trying to benefit himself or herself?

This comes up all the time in our daily lives.  We are inundated with self serving advice.

Think about all the radio, telephone and newspaper advertisements we are exposed to on a daily basis that try to convince us that a particular product or service is better than the competition.  Perhaps, in some circumstances, the product or service really is superior.  Perhaps, however, the advertisement is more an indication of inferiority because obviously word of mouth is not bringing in enough business.

How many times have you been given a warranty pitch by a salesperson trying to convince you to pay an extra 20% for an electronics item in order to get the 3 year warranty?  Unless you know the statistics for needing to rely on that warranty, you are as unequipped as I am to make the call.  Can you rely on the salesperson’s advice when they are driven by commissions to peddle the warranty?

Any time a person can benefit from the outcome of a decision you are struggling with, that person is potentially in a conflict of interest with you if he or she is helping you make that decision.

The conflict arises when the right decision for you is not the right decision for the person advising you.

How much strength of character does it take for someone to give you advice that benefits you, but financially hurts the person giving you the advice?

We have all come across such gems: the mechanic who tells you your car is perfectly fine; the salesperson who tells you, under her breath, to go to the competition for a cheaper product; the tire salesperson who tells you your tires are good for another year; the bank employee who tells you the life insurance offered on the mortgage is not necessary if you have sufficient private insurance.

The legal business is no different.

In my view, there are two clear situations in a personal injury case where the lawyer is in a potential conflict of interest with the client.

The one situation is when the lawyer is answering the question injured victims often have, as to whether or not a lawyer is really needed in order to achieve a fair result against the insurance company.  I’ve covered that issue in a previous post, “Is a lawyer necessary”.  I do not know how successful I may have been, but I tried to give my advice in a way that would not be self serving.  I directed readers to go to a different lawyer instead of me if they accept my advice that a lawyer is necessary.

The other situation is much more problematic.  It is when a settlement offer is being considered.

This conflict of interest issue recently came up in my practice.  I forwarded a settlement offer to a client.  When she came in to discuss it, she told me that she had been cautioned by a friend that I might recommend rejecting the offer for my own financial gain.

Her friend was wise to caution my client about lawyer self-interest, but he could not have been more wrong.

The fact is that lawyers typically benefit financially from settling files, and settling them early.

It takes a lot of a lawyer’s time to prepare for and run a trial.  This is time that the lawyer could otherwise be billing to hourly rate clients at $300.00 an hour.  It doesn’t take long for the value of that time to overtake any increase in fees arising from an increased settlement or trial judgment.

Let’s take a three week trial, which is not out of line for a chronic pain case.  I would spend a minimum of 15 hours for each day of trial, including preparation and actual trial work.  At my hourly rate of $300.00 per hour, that’s $67,500.00 worth of billable time.  To financially benefit the lawyer and produce a greater than $67,500.00 increase in fees, the trial result would have to beat the settlement offer by about $200,000.00 (at a one-third contingency fee).

What if the insurance company’s offer is only $50,000.00 less than fair?  The lawyer faces the prospect of spending more than that in billable time to enforce fairness at trial.  The increased fees actually recovered by the lawyer would be only about $15,000.00 if a fair result was achieved.  How much strength of character does it take for a lawyer to recommend going to trial to achieve a fair result in these circumstances?

Do your homework before you hire a lawyer.  Interview several.  Don’t rely on fancy advertisements.  Rely on word of mouth and your good instincts.  You will find the gems.

Published June 17, 2007 in the Kelowna Capital News