July 05

Insurance-Disclosure Court Rule Information and Request for Comments

by WSBA General Counsel Bob Welden

At its July 2005 meeting, the Board of Governors may consider recommending a Supreme Court Rule on Insurance Disclosure that would make available to the public the basic information of whether or not a lawyer in the private practice of law is insured against professional liability. The rule is based on the ABA Model Court Rule on Insurance Disclosure (the WSBA was a cosponsor of the Model Rule proposal). The Board of Governors invites your comments on this proposed rule. The text of the proposed rule is on page 39.

What would the rule require? The Insurance Disclosure Rule requires only that a lawyer certify in the annual license-registration renewal process whether the lawyer is engaged in the private practice of law, and whether he or she is currently covered by professional liability insurance and intends to maintain insurance while in private practice. It also requires lawyers to report to the WSBA within 30 days if the policy providing coverage lapses or is terminated. The process would be similar to the annual Trust Account Certification procedure.

What would this rule not do? It is important to note what this rule does not do. It does not require that a lawyer have insurance. It does not require that a lawyer make any affirmative disclosure to a client or prospective client that she has or does not have insurance. It does not require disclosure of coverage limits or other individualized information. Failure to disclose would not result in a disciplinary sanction, but rather would result in suspension of a lawyer’s authority to practice, and the suspension would be terminated simply by making the required disclosure.

Why consider this rule? Members of the public have the expectation that lawyers are insured for professional liability. In Washington, the public knows that you need insurance to be licensed to drive a car, to put on a roof, or to paint a house. The public expects that lawyers need to have insurance to be licensed to practice law. The profession bears the responsibility to recognize this expectation and to be answerable to it. Insurance is intended to protect the insured, but often clients who have been injured by professional negligence can receive meaningful recovery only if the lawyer is insured. In considering whether to pursue a malpractice claim on behalf of a client, the threshold question for most lawyers is whether there is insurance that makes a difficult claim worth pursuing. It is information that an informed client should have. In this case, we have the opportunity to do good for others at the same time we are doing good for ourselves. All lawyers should recognize the importance of insuring themselves to prevent their life’s work from ruining their life savings.

How would this information be made available to the public? The WSBA would post the information as disclosed on the WSBA website in the member directory, and it would also be available by telephoning the WSBA. To avoid potential public misunderstanding of the issues, there would also be a link to a webpage where anyone could learn more about professional liability insurance. For example, it would explain that malpractice insurance coverage is “claims-made,” i.e., even if the attorney was covered when the legal work was done, no insurance recovery is available unless the attorney is insured when the claim is filed. It would also note factors such as the fact that a lawyer maintains insurance does not mean that coverage is adequate because of policy limits and the effect of aggregate coverage in the event of multiple claims; that failure of a lawyer to comply with the terms of the policy might negate coverage; and that there are reasons why a responsible lawyer might choose not to carry malpractice insurance.

Has such a court rule been adopted elsewhere? Eleven state supreme courts have adopted rules requiring insurance disclosure, and four states are actively considering adoption of disclosure rules:

•  Seven states (Delaware, Illinois, Kansas, Nebraska, North Carolina, Michigan, and Virginia) require lawyers to disclose on their annual registration statements whether they maintain professional liability insurance, similar to the ABA Model Rule. Virginia adopted their rule in 1990, and maintains a consumer-oriented website where this information is available.

•  Four states (Alaska, New Hampshire, Ohio, and South Dakota) took a different approach and amended their Rules of Professional Conduct to require lawyers to disclose directly to their clients whether they maintain professional liability insurance.

•  In addition, the Arizona and Kentucky supreme courts and the Minnesota and New Mexico state bars are considering adoption of an insurance disclosure rule based on the ABA Model Rule.
If someone wants to know if a lawyer is insured, why not just ask? Both clients and lawyers should be encouraged to discuss all aspects of their professional relationship, but the reality is that persons seeking legal services are often not sophisticated individuals who are comfortable discussing anything with a lawyer, and, in fact, many lawyers are not comfortable discussing fees and other business issues with clients. Lawyers, as fiduciaries, should make this information available to the client. We should not expect that clients need to initiate discussions about liability insurance. The Insurance Disclosure Rule makes this information easily available to the public at no burden to the lawyer.

Your comments? Please share with the Board of Governors any comments you may have regarding this proposed rule. At their meeting on July 29–30, 2005, they may consider whether to recommend it for adoption by the Supreme Court. Please send comments to the attention of WSBA General Counsel Robert D. Welden at bobw@wsba.org or to 2101 Fourth Ave., Ste. 400, Seattle, WA 98121-2330.

More information: Additional information on the ABA Model Court Rule on Insurance Disclosure and on the adoption of rules in other states is available at the ABA website at www.abanet.org/cpr/client.html#insurance.

Admission to Practice Rules (APR)
APR XX Insurance Disclosure (Draft May 2005)

(a)  Each active member of the Bar Association shall certify annually in a form approved by the Board of Governors by the date specified by the form (1) whether the lawyer is engaged in the private practice of law; (2) if engaged in the private practice of law, whether the lawyer is currently covered by professional liability insurance; (3) whether the lawyer intends to maintain insurance during the period of time the lawyer is engaged in the private practice of law; and (4) whether the lawyer is exempt from the provisions of this rule because the lawyer is engaged in the practice of law as a full-time government lawyer or is counsel employed by an organizational client and does not represent clients outside that capacity. Each lawyer admitted to the active practice of law who reports being covered by professional liability insurance shall notify the Bar Association in writing within 30 days if the insurance policy providing coverage lapses, is no longer in effect or terminates for any reason.

(b)  The information submitted pursuant to this rule will be made available to the public by such means as may be designated by the Board of Governors which may include publication on the website maintained by the Bar Association.

(c)  Any lawyer admitted to the active practice of law who fails to comply with this rule by the date specified in section (a) may be ordered suspended from the practice of law by the Supreme Court until such time as the lawyer complies. Supplying false information in response to this rule shall subject the lawyer to appropriate disciplinary action.