Mandatory malpractice insurance back on agenda

by Kathleen O. Beitiks
Staff Writer

... Continued from frontpage

"I will request a detailed analysis," said John Collins, a Pasadena trial lawyer, who says he has serious doubts about the accuracy of bar figures indicating that approximately 22 percent of the state's lawyers are without malpractice coverage.

Collins, who says he has received many comments from lawyers supporting the concept of mandatory malpractice insurance, suspects that figure is higher.

The committee on professional liability insurance, directed by the board to study the matter, came back with a recommendation not to pursue mandatory malpractice insurance.

At the November board meeting, the committee's recommendation was not approved. Instead, it stirred up some heated debate, so the board decided to postpone its discussion.

Support and objection to the concept of mandatory malpractice insurance is based on both philosophical and pragmatic grounds.

"It's a noble goal," says Irvine sole practitioner Jennifer Feres, "but it won't work." Professional liability coverage is a business decision, says Feres, who is the California Young Lawyers Association (CYLA) representative on the board, "and it's not the State Bar's position to get involved in how I run my business."

Feres carries malpractice insurance now, but when she became a lawyer five years ago she couldn't afford it and included a disclosure to that effect on her fee agreements, "bolded, highlighted, asterisked and even verbally."

The whole discussion of malpractice coverage may seem like a case of deja vu for Kevin Culhane, co-chair of the professional liability committee. Culhane has been involved with the malpractice insurance issue for more than 10 years and was a contributor to a 1988 State Bar report studying the matter.

A 1986-89 member of the Board of Governors, Culhane is a Sacramento attorney who defends lawyers accused of malpractice.

What developed from the 1988 report, he says, was a bar-sponsored professional liability insurance program. "One of the things that became fairly obvious was that you can't mandate what you can't provide," he said. After calling for bids and studying the pros and cons, the State Bar decided to sponsor a coverage program offered by Reliance National Insurance Company.

Today, says Culhane, there are only two reasons attorneys don't have malpractice insurance: they elect not to pay for it ,or they have a bad claims history.

In 1987, a State Bar survey showed that 36 percent of attorneys in private practice had no insurance. By 1990, a demographic study indicated that number had dropped to 22 percent.

Culhane said his committee worked years ago to model a California plan based on Oregon's mandated program (the only one in the nation), but found that it would be difficult to establish a minimum level of coverage because "there's a very homogenous lawyer population in Oregon, but not in California."

Different needs

An entertainment lawyer in Beverly Hills has different coverage needs than a family law practitioner in Eureka, he said.

That remains true today and is one reason the professional liability committee disagreed with the 1995 report of the Commission on the Future of the Legal Profession, which recommended mandatory professional liability insurance for the state's lawyers, calling for disciplinary suspension if a minimum level is not maintained.

According to Kathleen Eichler, manager of the bar's insurance programs, it was tough to obtain professional liability coverage 10 years ago because there were no more than three carriers and the market was considered "hard." Premiums averaged $10,000 to $15,000 per lawyer.

Today there about 30 carriers and the market is very competitive, considered "soft." Depending on the type of practice and the attorney's claims history, premiums can run from a few thousand dollars to five figures.

Now there are carriers who write policies for part-time lawyers and offer graduated premiums for newly admitted attorneys.

Eichler says that because premiums in California are at such a low level, she would guess that current figures of lawyers who do not have malpractice coverage are even less than the 1990 figure.

Because bar figures indicate at least 80 percent of the state's lawyers already have such coverage, Gregory Segall, a public member of the board, finds no problem with mandating it. It's a consumer protection issue, says Segall. By not requiring such protection, he said, "we're sending the wrong kind of message that the legal profession is not policing itself."

Agreeing with Segall, Manny Ramos, a member of the California bar and associate professor at Tulane Law School in New Orleans, wrote to board members urging their support of mandatory malpractice coverage.

"Thousands of clients every year in California are hurt by their attorneys and, to their horror, discover that there is no remedy," wrote Ramos. "Lawyers know that plaintiff legal malpractice lawyers will not sue uninsured lawyers. Sure, it is a burden for a solo practitioner, or any lawyer to pay annual premiums, but what about the poor client's financial burden? What kind of stories are these clients telling others about the legal profession?"

Board member Jeff Tidus, a former law partner of Ramos', is one of the original members of the professional liability committee, currently working with the committee and researching the issue.

"It's a practical problem," says Tidus. "It requires legislation to pass, and insurance companies are not in favor of it." Providing coverage for high risk attorneys or those with a bad claims history is not economically attractive, he said.

Although there is no current hard data, the 1988 bar report on the state of professional liability coverage showed that more than 40 percent of the reported claims occurred in three areas: plaintiff injury or negligence, 20 percent; general litigation, 12 percent; and real estate, 12 percent. Fees disputes involved about 16 percent of the claims.

The two largest reasons for malpractice claims against California attorneys were: failure to competently handle a lawsuit, 18 percent, and failure to file an action for a client within the statute of limitations, 12 percent.

Code violations

Both are violations of the bar's professional conduct code and subject to disciplinary action.

As far as some are concerned, the bar's discipline system and the ability of a client to personally sue a lawyer cover the consumer protection angle.

Tidus says, however, that the discipline system does not fully address the problem and that an alternate rule may have to be explored, dealing with failure to satisfy negligence judgments.

Feres says that the State Bar recently has been pushing for equal access to justice, but by making malpractice insurance mandatory, lawyers will be forced to pass along the costs to their clients, making access even more difficult.

The whole concept is punitive in nature, she says, and focuses on consumers rather than an even-handed approach. The bar needs to give consumers some credit for making intelligent decisions, she adds, "but at some point the consumer has to take some responsibility."