State Bar targets solos and minorities

In an apparent attempt to protect the public, a State Bar committee is proposing a new rule of professional conduct and rule of court: This would  require all lawyers in California to tell their clients if they do not maintain professional liability (malpractice) insurance. 

The problem: The 30,000 lawyers in this category (who don’t have malpractice insurance) are primarily sole practitioners and attorneys of color.

The following is the Statement of Opposition filed on September 14th with the committee:

Statement of Opposition to Proposed Rules of Non-Insurance Disclosure

The State Bar of California has sent for public comment a proposed Rule of Professional Conduct and Rule of Court that would require all attorneys to make disclosure to their clients when they do not have professional liability (malpractice) insurance.

Support for the rule is based on the supposition that the public will be better protected. Based on the rationale enumerated below, I strongly oppose the proposed rules and urge the Committee to modify its position.

•    More than 70% of the lawyers in California are sole and small firm practitioners.
•    25% of California’s lawyers earn less than $50,000 per year; 49% earn less than $99,999 per year.
•    Professional liability insurance, on average, cost between $4,000 and $7,000; the cost is substantially higher in certain practice areas.
•    The cost of most available insurance would approximate 10% of the affected lawyers gross earnings.
•    A California Bar Journal survey of 2001 found that 18%, or approximately 30,000, of private practitioners go "bare" or do not have professional liability (malpractice) insurance.
•    Illinois found that 40% of its sole practitioners do not have such insurance.
•    There is no "affordable" malpractice insurance available in California for experienced attorneys.
•    The State Bar of California endorses a private insurance carrier’s offering of malpractice insurance and receives a substantial stipend from every policy written under this program. If this is not a conflict of interest, it is an apparent conflict.
•    Oregon has had mandatory malpractice insurance since 1978 and offers an affordable insurance program for its members.
•    Government and in-house counsel would be exempt. Most, if not all, larger law firms have insurance coverage, thus limiting the application of these proposed rules to sole and small firm practitioners.
•    Comment deadline: September 15,2006. Written comments are to be directed to Saul Bercovitch, Staff Attorney, The State Bar of California, 180 Howard Street, San Francisco, CA 94105. Fax: 415.538.2515.

Argument in Opposition to Proposed Rule Requiring Non-Insurance Disclosure
•    One reason for this proposal given in the report of the committee at page 9 suggests that clients may have an expectation that lawyers have professional liability insurance; this conclusion is without empirical support.
•    Clients, at the time of engagement, generally focus on their problems. Inserting disclosure of lack of insurance will either have no effect or will negatively impact the economic survival of a major segment of the Bar – sole and small firm practitioners, 30,000 of whom are estimated to be "bare."
•    If the public were to choose not to engage a lawyer who does not have professional liability (malpractice) insurance, The State Bar of California will be responsible for disenfranchising 18% of its population.  Their sole crime will be to refuse to purchase malpractice insurance. These lawyers have no grievance against them other than that they lack the economic muscle to purchase malpractice insurance.   
•    The lack of professional liability insurance does not mean the lawyer is incompetent or a "bad guy." That’s the inference, though, of the proposal.
•    If more information for clients is better than less, why not require lawyers to disclose their won-lost record and other evidence of the results they have obtained in the past for clients?
•    If public information were truly the reason for the proposal, why not educate the public about the economics of law practice, so that they truly know what to ask their lawyer.
•    If public information were truly the reason for the proposal, why not educate lawyers about the economics of law practice so they would be better equipped to afford such insurance? Why not mandate law practice management education for MCLE credit?
•    Other professions require neither professional liability insurance nor disclosure of the absence of such coverage. Not doctors, not accountants, not architects. Why should the legal profession? While this is not the direct objective of the proposed rules, it is the "backdoor" effort to compel purchase of such insurance.
•    The report suggests that the rules should be viewed as consumer protection. There is no empirical support that this will have any benefit for consumers.
•    If the Bar is truly concerned about consumer protection, then purchasing professional liability insurance should be mandated. And, as in Oregon, affordable professional liability insurance should be available.
•    Recently, the Board of Governors announced an effort to address the economic concerns of sole and small firm practitioners and to reverse the perception held by many that The State Bar fails to be concerned about their interests. The current effort flies in the face of such effort.

The small firm practitioner is less able to pass the increased cost of this proposal on to his/her clients. It is not reasonable to expect a lawyer to spend 10% of his gross earnings (not gross revenue) for such insurance when he/she can barely subsist now.

There is no evidence that the public either asked for this information (disclosure) or that the public will do anything with this information if they receive it.
The proposal sub rosa demands something of lawyers – get insurance. But, the Bar fails to provide what they demand. The Bar will enable private enterprise, perhaps even its own insurance provider who pays the State Bar for every policy written, to write policies at premiums most lawyers in this category (currently uninsured) can’t afford. There is no policy limit set forth in the proposal. How much insurance is enough to protect the public?
What happened to the promises of the Board of Governors to work for the benefit of sole and small firm practitioners? What happened to the promise of a purchasing cooperative that would allow lawyers to purchase the needs of their practice for affordable prices, including professional liability insurance?
Paraphrasing a cry from our Forefathers, there should "No demand by the State Bar without the economic ability to enable fulfillment of that requirement!" The Bar is attempting to put the cart before the horse.
Respectfully submitted,
Edward Poll (as an individual)
LawBiz® Management Co.
Former Chair of Law Practice Management & Technology Section, State Bar of California
Co-Vice-Chair, Counsel of Section Chairs, State Bar of California
Board approved by SAC® as a Coach to the Legal ProfessionFellow, College of Law Practice Management


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