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Broad opposition to insurance disclosure

By Nancy McCarthy
Staff Writer

In the face of widespread opposition to proposed rules that would require California lawyers to tell their clients if they carry malpractice insurance, a State Bar task force has revised its recommendation – barely. Despite the negative feedback, task force chair James Towery said the panel "unanimously decided we believe the original framework was still in the public interest."

The disclosure rules were developed after former bar President John Van de Kamp appointed a task force in 2005 to study whether an insurance disclosure rule was necessary. The American Bar Association adopted a model rule in 2004 and 20 states have adopted some kind of requirement.

The California task force recommended a rule a year ago that would:

  • Require lawyers to inform their clients if they carry professional liability insurance, and
  • Notify the State Bar of their insured status. The bar would then post that information on its Web site.

California would be the only state with such a dual requirement.

More than 100 lawyers, bar associations and other professional entities responded to the proposal, with almost 80 percent opposed in whole or in part. Many solo or small firm practitioners, in particular, argued that they would be disproportionately affected by a disclosure requirement and could not afford the high cost of malpractice insurance. Recently admitted lawyers and attorneys who serve clients unable to afford counsel also would be hard hit.

The proposal is "nothing less than an open invitation to a dissatisfied client to cut losses by suing the non-insured attorney in the hope of a quick cash settlement," wrote Sacramento lawyer Philip Tutt.

In October, the Conference of Delegates of California Bar Associations resoundingly voted to oppose the disclosure rules.

The chairs of several bar entities, including its ethics, professional liability and mandatory fee arbitration committees, offered support for the proposed rules. Los Angeles attorney Shiva Delrahim, for example, believes professionals who have fiduciary duties to their clients also have a responsibility to make pertinent disclosures to them. Clients look for honesty and integrity in their lawyers, she said, and can make a better-informed decision on whom to hire if more information is available.

The revised proposal, out for public comment until Aug. 6, makes disclosure prospective only, with no obligation to notify current clients, and eliminates a requirement that clients provide a signed acknowledgement of notification.

Still in the proposal is a requirement that the bar be notified whether a lawyer carries malpractice insurance. Failure to comply with the requirements would result in suspension from practice (an administrative, not disciplinary, action, similar to suspension for failing to pay bar dues).

Despite the revisions, board member John Dutton, who represents northern California, an area with large numbers of small firm or solo lawyers, remained opposed. "There are a lot of lawyers who are not aware of the details," he said. "We're alienating thousands of California lawyers if this proposal goes through."

Proposed New Insurance Disclosure Rules (Revised)

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