Legal Malpractice Insurance

The State Bar seeks public comment on options under consideration in its statutorily mandated malpractice insurance study.

Deadline: November 5, 2018

Background

The State Bar’s Board of Trustees appointed a Malpractice Insurance Working Group to conduct a statutorily-mandated review and study regarding issues related to errors and omissions insurance for attorneys, including:

• The availability of insurance;
• Measures for encouraging attorneys to obtain insurance;
• Recommended ranges of insurance limits;
• The adequacy of the disclosure rule regarding insurance; and
• The advisability of mandating insurance for licensed attorneys.

The State Bar is required to report its findings to the Supreme Court and the Legislature by March 31, 2019.

Discussion

The Malpractice Insurance Working Group has researched, collected data, and taken live testimony on numerous topics related to lawyers professional liability (malpractice) insurance, including the following:

• The history and current status of legal malpractice insurance requirements in California and other states;
• The advisability of mandating insurance, implementing an open market model;
• The availability and affordability of legal malpractice insurance, and recommended ranges of coverage; and
• Measure to encourage insurance coverage, and the adequacy of the current insurance disclosure rule.

The Malpractice Insurance Working Group is considering several options that may become part of the recommendations it will make to the Board of Trustees early next year, and seeks comment on these options.

Options Under Consideration:

1. Amending rules requiring attorneys to disclose to clients that they do not carry legal malpractice insurance. Options being considered:
   1. Requiring attorneys to disclose to the State Bar whether they have legal malpractice insurance, potentially including the amount of coverage and the type of policy (i.e., claims-made or occurrence-based) and;
      1. Making this information available to the public; or
      2. Limiting this information to aggregate analysis by the State Bar;
   2. Requiring written client acknowledgment of an attorney’s disclosure that they do not have legal malpractice insurance;
   3. Requiring attorneys to disclose on all written communication with clients, on their websites, and on all advertising, that they do not have malpractice insurance; or.
   4. No change to current disclosure rule.
2. Mandating legal malpractice insurance for attorneys as a condition of licensing, except for in-house counsel and government attorneys. Options being considered:
   1. Insurance to be obtained in the private insurance market (“Open Market Model”);
   2. Insurance fund, established by statute, would provide minimum insurance coverage for all attorneys (“Captive Insurance Fund Model”); additional coverage could be purchased on the private market;
      1. A Captive Fund could be run by the State Bar, a private insurance company, or an entity created expressly for this purpose.
   3. No mandatory insurance requirement (except for limited liability partnerships or law corporations, as presently required by statute).
3. Developing a Continuing Legal Education or Practice Management program that provides an interactive self-assessment of law practice operations in an effort to examine legal malpractice liability. Options being considered:
   1. Require all attorneys to complete the self-assessment;
   2. Require uninsured attorneys to complete the self-assessment; or
   3. Provide the self-assessment as an optional tool, but not require it.
4.  Promoting the voluntary purchase of insurance by:
   1. Educating lawyers about the benefits of insurance (including risk assessment and claims handling functions; CLE provided; etc.); and/or
   2. Educating the public about the significance of an attorney not having effective coverage (including claims-made “tail” policies).

Any known fiscal/personnel impact

Unknown at this time.

Background material

Item 702 September 2018

Source

Board of Trustees

Deadline

November 5, 2018

Direct comments to

Written comments may be submitted via an online public comment form.