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States Weigh Disclosure of Liability Insurance Status to Clients

By Lisa R. Bliss, Litigation News Associate Editor – October 20, 2009

More states are considering whether a lawyer should be required to disclose that he or she has or does not have professional liability insurance.

California recently joined a minority of states that mandate such disclosure to clients. In August, the California Supreme Court adopted Rule 3-410 of the California Rules of Professional Conduct.

The rule, which becomes effective January 1, 2010, requires a lawyer to disclose to a client in writing that he or she does not have professional liability insurance if it is reasonably foreseeable that the legal representation will exceed four hours. The rule exempts lawyers who serve as in-house counsel or government lawyers. It also does not apply to legal services rendered in an emergency to avoid “foreseeable prejudice to the rights or interests of the client.”

Disclosure to Clients or to State Bar Organizations
Seven states [PDF] currently require lawyers to disclose their professional liability insurance status directly to clients, according to the American Bar Association Standing Committee on Client Protection. Eighteen other states [PDF] have implemented rules requiring disclosure of such insurance status as part of the lawyer’s annual bar registration, rather than disclosure directly to clients. Most of the states that require reporting to the bar make the information available to the public, either via the bar website or upon request.

Oregon is the only state that requires lawyers to carry malpractice coverage. In Oregon, lawyers in private practice must carry professional liability insurance in the amount of $300,000 per claim and $300,000 aggregate insurance coverage through the Oregon Professional Liability Fund.

In Ohio, lawyers are not required to purchase coverage, but the Ohio Rules of Professional Conduct [PDF] require lawyers to notify a client in writing if their professional liability coverage is less than $100,000 per occurrence or $300,000 in the aggregate.

The Ohio rule, in effect since 2001, requires the lawyer to send written notice to the client if he or she does not carry insurance within the prescribed amounts. The notice includes an acknowledgement that the client is asked to sign and return, according to Brian F. Toohey, Cleveland, cochair of the Multi-Jurisdictional Practice subcommittee of the ABA Section of Litigation’s Ethics and Professionalism Committee.

Protecting the Public Interest
Although a written disclosure requirement may have the impact of pressuring lawyers who don’t have insurance to purchase it, “the importance of protecting the public, the consumers of legal services, outweighs any concerns there may be about the burden of requiring disclosure,” says James A. Brown, New Orleans, cochair of the Section of Litigation’s Professional Liability Litigation Committee.

“Because lawyers represent the legal system, and the public goes to lawyers to get protection, there is a strong public interest in the protection of knowing that the lawyer a person consults has the ability to respond if he makes a mistake,” says Brown.

Disclosure of Existing Coverage
Most lawyers already carry malpractice coverage, so a requirement to disclose the existence of coverage is simply an order to notify the client of something the lawyer was already doing. “As a profession, we are mindful of our own exposure to liability and the costs of doing business,” observes Diane Seltzer, Washington, D.C., cochair of the Section’s Solo and Small Firm Committee.

“I don’t know anyone who doesn’t carry malpractice insurance,” Seltzer says. “It can give a client peace of mind, and most lawyers have it already, so there is no harm in requiring disclosure of its existence.”

Some lawyers are concerned that the imposition of disclosure requirements have the effect of alerting clients to the existence of malpractice coverage, thereby making those who have coverage more of a target to be sued, observes Brown.

Regardless of such concerns, Seltzer favors transparency. “If a lawyer does not have coverage or is unable to get it, the client wants to know that information. Shouldn’t the lawyer-client relationship be one of trust at the start?” she asks.

ABA Model Rule
Implementation of some disclosure rules followed the ABA Model Court Rule on Insurance Disclosure, which was intended to offer prospective clients the ability to make an informed decision when hiring a lawyer, according to a report [PDF] of the Standing Committee on Client Protection. The report was issued when the ABA model rule [PDF] on disclosure was adopted by the ABA in 2004.

The ABA model rule requires that a lawyer disclose whether the lawyer is currently covered by professional liability insurance to the highest court of the jurisdiction and that such information be made available to the public.

At least four states are considering adoption of a professional liability disclosure rule, while four others (Arkansas, Connecticut, Florida, and Kentucky) have decided not to adopt a disclosure rule.

Keywords: Litigation, professional liability, insurance coverage, clients

  • November 12, 2009 – As a student of the law who is getting ready to dive into the world of law practice and not just legal study, I would like to understand the precautions that are being taken to prevent a massive influx of malpractice claims like you see in the medical industry today. Much of the debate that we currently see going on about health care today surrounds waste in over testing and the cost of malpractice insurance that every doctor must carry that is just then passed on to the patients who in turn sues because their 90 year old fathers heart stopped. How do we prevent these same things from happening in our field?
    How about a hypo: Lawyer one feels that a case a potential client brings to him is morally repugnant or frivolous but lawyer two feels it has merit. Lawyer two goes to file the claim only to find that the statute of limitations has run. Client now comes back and sues lawyer one for malpractice and has a witness on her side saying the case had merit. Whether it does or not, the lawyer has to deal with it and will most likely just end up taking cases that he feels are placing him at some risk of sanction from the bar just to avoid a lawsuit.
    If we have to advertise that we have insurance to pay for malpractice claims, how do we avoid every client suing because they lost in court? Shall we make everyone who has car insurance place a giant blinking light on top of their car that varies in color depending on the amount of coverage they have? Red for low coverage, orange for middle and Green for high coverage and inviting all crazies to ram into them with dollar signs in their eyes?

  • January 24, 2011 – I have a PI claim against a Hawaiian lawyer. Despite numerous calls to the Hawaiian Bar, no one can tell me of a mechanism to establish whether the Defendant carries insurance, short of going to trial. This seems a waste of my money (in doing the filing) and the tax payers money (in hosting the claim). If Hawaii chooses not to require its Attorneys to carry insurance (crazy) could it at least have a mechanism to compel PI status disclosure before we all end up in Court?

  • January 24, 2011 – Update on my previous post today. A further call to the Hawaii Bar led me to speak to a rep from the Hawaii State Bar Lawyer Referral Service. When I put the above question the them I was provided with three firms to contact. One did Probate! Two did not do PI. In conclusion, in the State of Hawaii your lawyer will likely have no insurance, he will be not be compelled let you know, and the State Bar will be unable to help. The only way of finding out your negligent lawyer has no insurance is to take him to Court. Madness.


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