June 2007
New Rule on Malpractice Insurance Disclosure
by Robert Weldon
Effective July 1, 2007, pursuant to Rule 26 of the Admission to Practice Rules (APR), every active member of the Washington State Bar Association will be required to disclose on the annual licensing form whether or not the lawyer maintains professional liability insurance. The first time current members of the WSBA will be required to report this information to the WSBA will be during the 2008 annual licensing process beginning in December 2007. New admittees and members returning to active status will be required to report at the time of admission.
What is the purpose of required insurance disclosure?
The purpose of the insurance disclosure rule is client protection. Under the Washington Rules of Professional Conduct, one of the basic principles of the lawyer-client relationship is that the lawyer will give the client sufficient information regarding material facts to allow the client to make an informed decision in matters relating to the representation. See, e.g., RPC 1.4; 1.7. Whether a lawyer maintains professional liability insurance may be a material fact for some persons in considering whether to hire a lawyer, and it should be easily available to a client or prospective client.
What does the rule require?
APR 26 requires that each active status lawyer certify on the annual license registration form (a) whether the lawyer is in private practice; (b) if so, whether the lawyer maintains professional liability insurance; (c) whether the lawyer intends to continue to maintain insurance; and (d) whether the lawyer is a full-time government lawyer or house counsel and does not represent clients outside that capacity. The form will also require notification to the WSBA within 30 days if the lawyer in private practice ceases to be insured.
Will failure to disclose be a disciplinary violation?
This is an Admission to Practice Rule requiring disclosure, and not a disciplinary rule. It does not mandate that lawyers be insured. However, failure to comply with the disclosure requirement will result in administrative suspension from practice until the information is disclosed, in the same way that lawyers may be suspended for failure to comply with the continuing legal education reporting requirements.
What will be done with this information?
This insurance information will be available to clients or prospective clients by posting it as part of the lawyer directory on the WSBA website or by contacting the WSBA. In practice, the availability of this information will operate similarly to the contractor insurance and bonding information available to the public through the Department of Labor and Industries by contacting the Department or searching the Department's website.
Has this been done elsewhere, and what is the experience there?
Nineteen other states currently require disclosure of insurance, either through the lawyer licensing or regulatory agency (Arizona, Delaware, Idaho, Illinois, Kansas, Massachusetts, Michigan, Minnesota, Nebraska, Nevada, New Mexico, North Carolina, Virginia, and West Virginia), or in writing directly to clients (Alaska, New Hampshire, Ohio, Pennsylvania, and South Dakota). The experience in states that have had a disclosure rule in effect for some time has shown no increase in either frequency of insurance claims or in increased premium rates. There also has been no indication of any disproportionate impact on new lawyers, solo and small-firm lawyers, or minority lawyers, nor that it has made legal services more expensive or reduced lawyers' willingness to provide pro bono services.
Was notice given before this rule was adopted?
This suggested rule was circulated for comment among the WSBA members. It was e-mailed to approximately 15,000 active WSBA members, posted on the WSBA website, and published in the July 2005 Bar News. The WSBA received e-mail responses from about 90 members and a few letters, both pro and con.
What concerns did WSBA members have, and what are the responses?
One concern that was expressed is that such disclosure is misleading because professional liability insurance is "claims made," and the disclosure does not indicate policy limits, deductibles, whether defense costs are within or without the policy limits, etc. In response, it was agreed that when this information is posted on the WSBA website and otherwise made available, there will be additional information about professional liability insurance and suggested questions that a client may want to ask. The website information will note that lawyers may make a responsible decision not to maintain insurance because the lawyer may choose to be financially responsible (self-insured), or is an in-house or government lawyer whose employer has chosen to bear the risk of errors, or for other reasons. (See sidebar for text of website information).
Another issue that was raised concerned government lawyers and in-house counsel who provide pro bono work through qualified legal services providers that maintain professional liability insurance. It was suggested that the rule should specifically address this. However, as the rule is written, if a government lawyer or in-house counsel represents clients outside of that employment, but does so in a context where he/she is insured, then the answer to (a)(2) would be "yes" and the answer to (a)(4) would be "no." (See inset for full text of APR 26.)
Conclusion
Lawyers take their responsibility to the public seriously, and this is one simple means to make this information available.
Robert Welden is WSBA general counsel.
Inset: Text of Rule
APR 26. INSURANCE DISCLOSURE
(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 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.
Adopted effective July 1, 2007.
Sidebar: Text of Website Information
Professional Liability Insurance Policies
The purpose of the insurance disclosure rule is client protection. Under the Washington Rules of Professional Conduct, one of the basic principles of the lawyer-client relationship is that the lawyer will give the client sufficient information regarding material facts to allow the client to make an informed decision in matters relating to the representation. See, e.g., RPC 1.4; 1.7. Whether a lawyer maintains professional liability insurance may be a material fact for some persons in considering whether to hire a lawyer, and it should be easily available to a client or prospective client.
Professional liability insurance policies provide insurance coverage for some but not all professional liability (malpractice) claims made against a lawyer. Most professional liability policies are written on a "claims-made" basis. This is different from the usual homeowners or automobile insurance policy. This means that the insurance company providing the insurance has agreed to cover claims that are made against the lawyer during the term of the policy. In other words, the policy that applies to a particular claim is the policy that is in effect at the time the claim is presented to the insurance company with a demand for payment — not the policy in effect when the lawyer's alleged negligence or mistake took place. Malpractice insurance policies typically limit the amount that the insurance company can be required to pay on each claim and the total amount that the insurance company can be required to pay on all claims made against the lawyer during the term (or effective period) of the policy. The maximum amount of coverage provided by a malpractice insurance policy is called the "limits" of the policy.
Although Washington lawyers are not required to have professional liability insurance coverage, they are required to report to the Washington State Bar Association, on a yearly basis, whether they have coverage. They are not required to report the following:
• Who their insurer is, if they have malpractice insurance coverage.
• The limits of their policy.
• The amount of any deductible that the lawyer must pay before the insurance company is obligated to pay a claim.
• Any limitations on or exemptions from coverage. For example, most legal malpractice insurance policies do not cover claims against a lawyer that arise out of illegal conduct by the lawyer.
Not all lawyers maintain professional liability insurance. Some lawyers may make a responsible decision not to maintain insurance because the lawyer may choose to be financially responsible (self-insured), or is an in-house or government lawyer.
The information provided on this website is the information reported to the Washington State Bar Association by each active-status lawyer regarding his or her professional liability insurance as of the date of the lawyer's report to the State Bar. This information is published here because the Washington State Bar Association believes that it may be of value to consumers of legal services. The Washington State Bar Association does not independently verify the insurance information provided by lawyers. There is no guarantee that a lawyer has maintained insurance coverage after the report date or will continue to maintain insurance coverage in the future. There is also no guarantee that a lawyer has adequate insurance limits to cover all potential claims or that a particular claim will be covered by the policy. Note that it is also possible that the information displayed was erroneously reported or incorrectly entered in the State Bar's database.
The following is a list of questions that a prospective client might ask before entering into a lawyer-client relationship with a particular lawyer:
• Do you presently maintain professional liability insurance coverage?
• What is the name of your insurer?
• What are the limits of your coverage? Have any of those limits been used in the payment of other claims?
• What is the deductible under your policy?
• Does your policy cover the type of work you are doing for me?
• What is the term of your current coverage?
• Will you advise me if you discontinue your coverage or change your limits?
• Could you provide me with a Certificate of Insurance (evidence from an insurance company that the lawyer is insured)?
• If you do not maintain professional liability insurance, why have you made that decision?
