Bar aims for better insurance program

Malpractice coverage is an ongoing concern

In the midst of an insurance cycle that has seen skyrocketing attorney malpractice premiums for more than a year, the State Bar is exploring ways to provide an expanded range of professional liability options to its members while at the same time raising funds to pay for its legislatively mandated program for alcoholic and drug-addicted lawyers.

Early this month, the bar planned to circulate a "request for information" to the insurance brokerage industry seeking input on a potential joint venture in which the bar would serve as an agency, sharing workload and fees with an established broker/ agent. Should the concept be well-received, the bar ultimately may become a stand-alone agency and would offer a full range of insurance benefits to its members.

"The State Bar is looking at its role in the delivery of insurance benefits to its members," said Russ Roeca, a San Francisco attorney who heads a board of governors' committee studying non-dues revenue. "We want a program to provide the broadest possible coverage to the broadest number of members."

The current malpractice crisis, coupled with the recently created Lawyer Assistance Program, makes exploring such a program an appropriate option, Roeca added. "We're in a situation where members want to keep dues low. We really are running a bare-bones operation but we still want to provide quality services to our members."

Providing greater access to professional liability insurance for all California lawyers has been twice the focus of legislative initiatives that explored the possibility of mandatory malpractice insurance. Both initiatives, in 1976 and 1987, were driven by the cyclical withdrawal from California of carriers offering affordable malpractice insurance.

The current bar effort is driven by the same concern as well as the statutory permission to seek alternative funding for the LAP. Other states with lawyer assistance programs are funded in part by professional liability insurance monies.

The LAP provides resources, treatment and monitoring for attorneys with drug and alcohol problems as well as those suffering mental illness.

A key benefit of a bar-operated malpractice insurance program would be funding for the LAP, which now is paid for by a statutory $10 per active member dues assessment, to the tune of $1.4 million a year.

The statute permits the bar to seek alternative non-dues funding which, if sufficient to support the LAP, would allow the $10 fee to be placed in the general fund.

In addition, by maintaining the stability and quality of malpractice coverage, the program could ease the cyclic insurance crises confronting the legal profession.

About 6,600 lawyers are currently insured by the bar-approved malpractice insurance program, which provides premium revenues of just over $32 million. The vast majority of premium-holders work alone or in small firms.

The bar's involvement is limited to selecting the broker and negotiating the terms of its relationship with the bar.

Roeca's committee has studied elements of the Oregon State Bar's mandatory insurance program as well as the eventual creation of a virtual agency. As a first step towards meeting the challenges of a mandatory program, the joint venture concept would provide the opportunity for the bar to develop the necessary expertise to manage a large program and gain the confidence of the membership to consider such a program.

Starr Babcock, a special assistant to the bar's executive director, said that if the bar could ultimately act as an insurance agency, the benefits would include, in addition to increased revenue, a shared risk pool, the ability to make clients whole prior to the disciplinary process, and an incentive for lawyers to call early for help with practice problems.

Oregon's program has a "repairs" hotline for attorneys to call when they are in trouble because of inexperience or neglect. The program helps the lawyer and will hire additional counsel if necessary, give advice or attempt to settle a potential claim. The average professional liability claim settlement in Oregon is about $16,000.

When attorneys get in trouble in Oregon, Babcock said, their first call is to the mandatory insurance program and the lawyers assistance program.

"If we had a broad-based State Bar-sponsored and -run insurance agency that provided a wide range of professional liability products so that instead of 6,000 lawyers we had 60,000 lawyers, we would be more likely to offer them an incentive to call for assistance," Babcock said. He called the challenges and obstacles posed by the concept of mandatory insurance in California "breathtaking," and said they necessitate an interim shared responsibility program.

Said bar President James Herman, "At a time when the bar has limited resources and more focused statutory responsibility to provide regulatory oversight and member services, this seems to be a good opportunity."

The number of California attorneys who do not carry malpractice insurance is unknown, but bar officials estimate that between 15 and 30 percent of its active members - anywhere from 20,000 to 40,000 lawyers - are uninsured. Thousands go bare simply because they cannot afford to pay the premiums.

The Oregon legislature empowered the bar in 1977 to create a mandatory malpractice insurance program. While such a move isn't currently on the California legislature's radar, 12 states are studying the Oregon model.

Long term care coverage offered

Long term care costs in California can range from $100 a day to as much as $300 per day. And the cost of that care is growing at a rate of more than 5 percent annually, meaning that care costing $50,000 per year today could cost nearly $90,000 annually 10 years from now.

Long term care is generally defined as the care people need when they are "chronically ill" and cannot perform the normal tasks of living independently. Neither Medicare nor supplemental Medigap, which pays the difference between Medicare reimbursements and actual costs, covers long term care.

Medicaid can help, but only after a patient has run through most of his or her assets. It doesn't cover custodial care at home or in a nursing home.

As part of an enhanced benefits program, members of the State Bar and their parents and children can now purchase long term care at specially discounted rates through the bar's endorsed insurance carrier, John Hancock Life. The policy is designed to reimburse one for care whether it is provided at home, in a residential care facility or in a nursing home.

When purchasing a long term insurance policy, there are essentially four steps to determine which coverage will best fit your needs, said Gerald Kouzmanoff, the bar's marketing representative.

• Determine your "facility daily maximum benefit." This can range from as low as $100 per day to as high as $500 per day. You also have the option of selecting a similar daily benefit for residential care and home care, or a lower percentage, such as 50 percent or 70 percent of the daily facility benefit. The daily facility benefit should be based upon the current cost of care for a facility you would most likely enter in your local area.



• Determine the "benefit period," which determines the maximum benefit that will be paid out from your policy. The State Bar's endorsed John Hancock policy offers members a number of choices varying from as short as one year to lifetime.



• Choose an "elimination period." This is the number of days that you elect to pay for care before your policy begins to pay. Your choices normally range from 30 days to 90 days, but options can be as long as 730 days.



• Elect an "inflation option." You can purchase a policy in which your daily and maximum benefits remain level throughout the life of the policy. Or, you have the option of selecting a plan whose daily and maximum benefits increase annually, either by a 5 percent simple interest rate, or a 5 percent compound interest rate. The younger one's age when purchasing the policy, the more strongly one would consider inflation options which guard against the effects of rising long term care costs.

When selecting a long term care insurance policy, Kouzmanoff said, it is also important to consider one that is qualified for the California Partnership for Long Term Care, because it provides asset protection when applying for Medi-Cal, as well as other advantages to the policyholder. The State Bar-endorsed program does offer the option to purchase a plan that qualifies for the partnership.

For more information, call the State Bar's insurance representatives at 1-800-653-8003 in Southern Califo-nia, or 1-800-548-2671 in Northern California.

Additional information is available at www.calbarltci.com.