“No taxation without representation!” State Bar has forgotten this founding principle.

On Saturday, June 17th, The State Bar of California moved one step closer toward approving a new Rule of Professional Conduct requiring all California lawyers disclose whether they have malpractice insurance coverage.  The Board approved a resolution to send out for public comment a new Rule that requires disclosure to each client AND to the State Bar for placement on the Bar’s web site whether the lawyer has malpractice insurance.

The following memorandum was prepared in opposition to the Board’s position for two reasons:
First, The Board adopted not more than three months ago that the State Bar has two purposes:
1.)  To serve and advance the interests of its members, and 2.)  To protect the public
This resolution contradicts the basic tenet of that spirit in that members’ interests are ignored. In fact, more than 60% of the Bar’s members’ economic interests are ignored.

Second, the current resolution also does not serve the real interests of public against unscrupulous attorneys (the few that may be out there); in fact, it does NOT protect the public.

Thus, the following is a statement of my initial thoughts on the resolution approved by the Board of Governors for public comment of the proposed Rule to require disclosure of whether a lawyer has malpractice insurance. 

As an aside, if the Board is interested in full disclosure of all aspects that might go into the deliberative process of a client hiring a lawyer, why is it that there is no movement to require a large law firm to disclose that it is self-insured or insured with a captive group rather than a State-rated, traditional insurance company? And why is it that there is no movement to require a large law firm to disclose its profit and loss information, a factor that might cause a client to negotiate a little more diligently in the fee-setting process? Why is it that all the proposals discussed concerning the economics of practicing law seem to adversely impact the sole and small firm practitioners?  It seems to me that the Board should carefully search its collective soul before unconsciously moving too far down this path. Your decision, whatever it turns out to be, should be consciously made! Know that, for good or bad, you will be changing the economics of a significant portion of the Bar. 

Comments re proposed rule change:
As I understand the proposed Rule of Professional Conduct and the proposed Rule of Court, California lawyers would be required to disclose to their clients and to The State Bar (for the web site of The State Bar) whether he/she maintains malpractice insurance coverage.

In my opinion, the basic flaw with the proposed rule is that it is requiring an act of lawyers that will have economic consequences to them without providing the mechanism for obtaining such malpractice insurance at  “affordable” rates.

At the Riverside Board Retreat, I was ecstatic with the acknowledgment expressed by our President and the Board members there that the Board of Governors has a responsibility to protect and serve its members. Yes, the Bar must protect the public. But an equal responsibility is to serve its members. Since then, I’ve seen movement by the Board and the staff to address this issue with vigor.

Today’s action, however, is likely to be seen by our members as one more action against its members, with dubious benefits to the public. And, ACTIONS SPEAK LOUDER THAN WORDS. For all the platitudes expressed by our leaders, today’s action is a slap in the face to those who can least afford a new expense.

Background (based on comments expressed by the committee’s chair):
•    Only fifteen States currently require either direct disclosure by an attorney to his/her client, or indirect disclosure by reporting to the State Bar of the lawyer’s jurisdiction.
•    The California proposal would require BOTH direct and indirect disclosure.
•    The Committee recognizes the need to i) educate the public about the complexities of the malpractice insurance industry, and ii) work with the insurance industry to create affordable malpractice insurance coverage.
    •    Parenthetically, despite the recognition of this need, the proposed Rule is not tied to the requirement that such insurance be made available.
    •    Faced with a similar concern, Oregon years ago developed its own insurance program to help lawyers have both coverage to protect the public and rates that were more affordable than the commercial market was commanding.
    •    While I do not have statistics, one observer today suggested that auto insurance rates are lowest where there is no mandatory insurance requirement; once there is a mandatory provision, insurers know they can raise the rates with impunity. Such, I fear, would be the case in this instance as well without the State Bar controlling the market. And premium rates are already high.

•    Based on a recent survey of California lawyers (discussed in Riverside), 25% of California lawyers earn $50,000 per year or less. This figure increased from 18% in 2001.
•    The Committee chair said that 18% of California lawyers, in a survey several years ago, went without insurance coverage.
•    The least expensive insurance premiums being in the vicinity of $4,000 to $7,000.
•    In a recent Illinois study, 20% of their lawyers were without coverage. BUT, 40% of their sole practitioners were without coverage! 

My opinion
•    The committee may believe that this group of lawyers is a danger to the public. If this be the case, I suggest that there are other approaches that will more effectively protect the public while neither digging (not just dipping) into the pocket of the lawyer who can least afford it nor causing such lawyer to appear to his/her client as an economic disaster by such “admission” of non-coverage.
•    Such a rule supported by the action of the Board will be affecting more than 60% (sole and small firm practitioners) of the Bar membership directly in their pocket book!
•    This is the group that can least afford additional expenses being laid upon them.
•    This proposal doesn’t really protect the public.
•    If the Board sends the proposed rule for public comment in its current format, members of the Bar will once again conclude that their leaders have lost touch with the reality of today’s economics of practicing law; they will continue to believe that the Board is not interested in advancing the interests of its members; and they will continue to wonder why the sole and small firm practitioner continues to be the victim of its leadership.

Conclusion and request:
•    Request:  Modify the proposed resolution before sending out for public comment to provide that the Bar will provide or enable lawyers to obtain  “affordable” insurance before such rule becomes effective.
•    I urge the Board to return to the philosophy expressed so eloquently in Riverside being a servant to its members as well as a protector of the public.
•    I urge the Board to consider the paraphrase the outcry of our Founding Fathers (“No taxation without representation.”): No insurance requirement without enabling insurance!


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