Board committee approves another version of insurance disclosure rule

Lawyers will have to tell clients that they do not carry malpractice insurance only if they provide more than four hours of representation under the newest disclosure rule proposed by a committee of the State Bar Board of Governors. The recommendation is the fifth version of a proposed rule that has divided the board for more than a year. Even the committee that voted to send the newest incarnation out for additional public comment split on a 4-3 vote.

In addition to the four-hour requirement, the proposed rule includes a provision that it would not apply to “legal services rendered in an emergency to avoid foreseeable prejudice” to a client’s interests. It also would not apply if the lawyer previously informed the same client that he or she is not insured.

The new proposal seemed to mark a compromise that bar President Jeff Bleich said he hoped “will satisfy everyone enough that we’ll be able to move forward.”

The disclosure issue has posed a politically thorny problem for the board. The California Supreme Court asked more than two years ago that the bar make a recommendation about insurance disclosure. However, the proposal sparked widespread opposition from solo and small firm lawyers, who complained they would be disproportionately affected, as well as the Conference of Delegates of California Bar Associations and other local bars.

The American Bar Association adopted a model rule in 2004 and 23 states have adopted some type of disclosure requirement.

Proponents, who include bar committees on ethics, professional liability and mandatory fee arbitration, see disclosure as a public protection measure and a way to provide important information about attorneys to prospective clients. Opponents see it as an expensive requirement that could stigmatize attorneys who do not carry malpractice insurance and could serve as an incentive for disgruntled clients to sue for a quick cash settlement.

The new proposal was crafted by bar governor John Dutton, an Auburn attorney who has led the opposition to a disclosure rule that he describes as “window dressing” that will do little to protect the public but will impose an “onerous” burden on lawyers who are not insured.

State Bar staff were “concerned” about the new version because they said the four-hour requirement is arbitrary and its “reasonably foreseeable” qualifier is ambiguous.

John Peterson, a bar governor from Fresno, offered a rule — originally proposed by a bar task force in June 2006 — that would require lawyers to notify the bar whether they carry insurance and the bar would in turn identify those without insurance on its Web site.

Such a requirement would skirt the question of when the engagement of a lawyer by a client begins and provide material information clients can consider when hiring an attorney, Peterson said. “I would argue that the disclosure rule re-quiring a lawyer to communicate with a client is not as effective as having the information available to anyone who wants it on the Web site,” Peterson said.

Dutton argued strenuously that imposing such a requirement would alienate and anger the membership, who he suggested would contact legislators to oppose State Bar fee legislation and who will refuse to contribute to revenue-producing projects, such as the bar’s new Justice Gap Fund.

“I can’t think of any proposal that will more severely shoot this bar in the foot,” he said. “There’s a lot of anger and hostility out there.”

Peterson’s motion failed by a 4-3 vote.