ALA Risk Management and Liability 2

Question 1

A law firm's client data is exposed in a third-party vendor breach. Under which legal theory is the firm MOST likely to face liability?

Accepted Answer

Negligent supervision of a third-party contractor

Answer

Firms have a duty to exercise reasonable care in selecting and overseeing vendors who handle confidential client data, making negligent supervision the most applicable theory.

Question 2

Which document formally transfers identified risks to an outside party and is commonly used in vendor agreements?

Accepted Answer

Indemnification clause

Answer

An indemnification clause contractually shifts specified risks and associated losses from one party to another in a vendor or service agreement.

Question 3

A CLM candidate reviews a firm's insurance portfolio. Which coverage specifically protects against claims arising from professional errors or omissions by attorneys?

Accepted Answer

Legal malpractice / professional liability insurance

Answer

Legal malpractice insurance, a form of professional liability coverage, protects attorneys and the firm against claims resulting from alleged errors, omissions, or negligent acts in legal representation.

Question 4

During a risk assessment, the team plots risks on a heat map. What two dimensions are typically used on the axes?

Accepted Answer

Likelihood and impact

Answer

A risk heat map plots risks along axes of likelihood (probability of occurrence) and impact (severity of consequences) to prioritize mitigation efforts.

Question 5

A law firm implements mandatory conflict-of-interest checks before accepting new matters. This practice BEST represents which risk management strategy?

Accepted Answer

Risk avoidance

Answer

Performing conflict checks before accepting a matter avoids taking on engagements that would expose the firm to ethical violations or liability, a risk avoidance strategy.

(ALA) Association of Legal Administrators CLM Practice Test

(ALA) Association of Legal Administrators CLM Practice Test

ALA Risk Management and Liability 2