Finally, board approves an insurance disclosure rule
The State Bar Board of Governors finally adopted a proposal last month that
will require attorneys to tell their clients if they do not carry malpractice
insurance.
Sometimes.
By a vote of 16-4, the board accepted a compromise rule of professional conduct
that a lawyer who does not carry professional liability insurance must disclose
that to a client (a) in writing, (b) at the time of engagement and (c) if the
representation exceeds four hours.
The recommendation now goes to the California Supreme Court for approval.
“This proposal should not be troubling to the board,” said bar
President Jeff Bleich, adding that the “parade of horribles” suggested
by opponents to disclosure has not happened in any state with more aggressive
policies.
But John Peterson, a governor from Fresno who favors both a disclosure requirement
and posting a lawyer’s insurance status on the bar’s Web site,
described the proposed rule as “an unnecessary irritant to the attorney-client
relationship.”
And to board members who described the compromise as a half loaf that was
better than nothing, he retorted that a “moldy half loaf” was not
acceptable.
The vote ended a three-year process that began with the 2005 appointment by
former bar President John Van de Kamp of an insurance task force. After a year
of study and a round of public comment, the task force proposed both a rule
of professional conduct that would require disclosure to clients and a rule
of court mandating disclosure to the bar.
Opponents, mostly small firm and solo attorneys led by Chico Governor John
Dutton, said the disclosure requirement would affect them disproportionately,
stigmatize those who do not carry insurance and ultimately reduce the availability
of low-cost or pro bono services to clients who cannot afford to hire a lawyer.
More revisions led to a second and then a third round of public comment. As
public member George Davis noted at last month’s discussion, “We’ve
beat this to death.”
Supporters of a disclosure requirement believe it enhances public protection
and is material to a potential client’s decision in hiring a lawyer.
James Penrod, a governor from San Francisco who has litigated numerous malpractice
matters, called the arguments opposing disclosure “red herrings to push
off the reality that the public wants to know.” Nevertheless, Penrod
voted for the final compromise because “I don’t want to lose a
half a loaf. I don’t like it either. You can do a hell of a lot of damage
in four hours.”
Dutton reiterated his argument that a disclosure requirement is “oppressive” and
damages both the bar and small and solo practices. He believes if any information
should be disclosed, it should be facts such as whether an attorney lost a
trial because of an error or whether malpractice claims have been filed against
him.
Twenty-three states have adopted some form of insurance disclosure rule; 18
follow the ABA model that requires lawyers to disclose on their annual registration
statement whether they maintain professional liability insurance. Oregon is
the only state that requires lawyers to carry malpractice insurance.
Jim Towery, the former State Bar president who chaired the task force, said
he was pleased the board adopted “a portion” of his group’s
recommendation. “I think this is an important step towards achieving
client protection in California and if the Supreme Court adopts disclosure
in any form it will add California to a growing list of states that have this
element of client protection.”
The bar’s Law Practice Management and Technology Section and its Committee
on Professional Responsibility and Competence opposed the disclosure requirement.
The proposed rule does not apply to government lawyers or in-house counsel
or to lawyers who previously advised clients that they do not carry malpractice
insurance. If a lawyer no longer carries insurance during the representation,
he or she must inform the client within 30 days.
In addition, the rule does not apply to legal services rendered in an emergency
to avoid prejudicing a client’s rights or interests.
The resolution also instructed the bar to study ways to make professional
liability insurance more available and affordable and to look for ways to compensate
clients who are harmed by uninsured lawyers.
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