"Going bare" is the term commonly used when an attorney or other professional elects not to carry insurance against his or her liability for professional negligence or malpractice. The usual reasons for choosing to go without malpractice insurance are economic: the attorney estimates that the likely cost of responding personally to any liability will be less than the often high cost of paying the insurance premiums. The attorney's economic self-interest in this calculation is clear, but what of the attorney's obligations to clients who have retained his or her services in the expectation that there will be insurance available to respond should the attorney, heaven forfend, provide those services in a negligent fashion?
Recovering web journal-ist David Giacalone has passed along this exchange from the American Bar Association's Dialogue magazine between the manager of a Lawyer Referral and Information Service (LRIS) -- a service devoted to providing members of the public access to attorneys who may be able to meet their needs in a particular field or locale -- and Richard Zitrin, director of the Center for Applied Legal Ethics at the University of San Francisco, writing as Dr. Ethics:
[10/31/03: This post has been updated in its continuation.]
Dear Dr. Ethics:Boy, have we got problems! Last week we learned that one of our panel members just dropped his errors and omissions insurance. We’re removing him from the panel, since malpractice coverage is a requirement (and we like that little “Meets ABA Standards” logo). But he has four open cases that we know of with LRIS clients. What can we do to protect them, since his coverage is—like most malpractice coverage—on a “claims made” basis? We understand that means if one of our clients complains next week about something that happened last year, the attorney won’t be covered.
[Additional instances of attorney misbehavior omitted.]
—Longwinded in Longmeadow
Dear Long-Long:
Yes, you do indeed have problems! And guess what? I can’t solve them all, at least this time, but I may be able to help for the next time around. Let’s start with the insurance issue.The secret here is in your contract with your lawyers—you know, the pledge you make them sign when they reapply each year. By now, pretty much every LRIS has turned its yearly application into a new contract with its lawyers. This is what requires the panelists to have errors and omissions insurance in the first place. In many states, lawyers are able to pick up relatively inexpensive insurance riders that only cover their LRIS clients.
Why not amend your rules to require that if panelists drop their insurance, they are required to buy a “tail” that covers those existing cases forever, so that even if a claim is made later, it’s covered? “Tails” are very common; lawyers buy them frequently, such as when they switch carriers. You may even be able to work with whoever provides low-cost LRIS insurance to develop a special LRIS “tail” plan.
What can you do about this lawyer this time? Well, read your application contract carefully, and see whether it might be interpreted to require the lawyer to keep insurance in force for his LRIS clients. If you can, make the argument that he’s required to do this. Perhaps he can buy a “tail,” or maybe he has even done so already.
The more dicey issue is what to do about informing the clients that he no longer has insurance. This is more a policy matter than an issue for Dr. Ethics (said he, ducking and passing the buck.) I’m a bit reluctant to recommend informing the clients, since it might interfere with a healthy attorney-client relationship. Looking to the future again, you could add into your application the fact that if this happens the lawyer is required to inform the client, and if he or she doesn’t, you will. But even this last idea should be considered as a policy matter by you and your board or LRIS committee.
[Response to omitted issues omitted.]
—An Exhausted Dr. E.
As you might imagine, David Giacalone (whose emphasis it is in the preceding quotation) does not concur in Dr. E's analysis. David cites us to Rule IV of the ABA's own Model Rules governing lawyer referral services:
A qualified service must be open to all lawyers licensed and eligible to practice in this state who maintain an office within the geographical area served, and who: (1) meet reasonable objectively determinable experience requirements established by the service; (2) pay reasonable registration and membership fees not to exceed an amount established by the (State Bar Standing Committee on Lawyer Referral and Information Services), hereinafter "the Committee", to encourage widespread lawyer participation; and (3) maintain in force a policy of errors and omissions insurance, or provide proof of financial responsibility, in an amount at least equal to the minimum established by the Committee.COMMENTARY
The intent of subsection (3) is to ensure that, in the event errors are made by the participating attorney, the client has redress through the attorney's policy of insurance. The requirement is contained in the ABA's Minimum Quality Standards.
Only by requiring such insurance, or a showing of financial responsibility, can a client's needs best be satisfied. In states where referral services are not immune from lawsuits for negligent referral, this requirement will help protect the service from such suits; in states where such immunity exists, it ensures that a client may find redress against the principal negligent party, the attorney.
Given that LRIS materials regularly emphasize to prospective clients that the attorneys to whom they may be referred will have necessary insurance coverage in place -- and given that California and most other jurisdictions require that attorneys disclose whether they do or do not have such insurance when entering into most attorney-client relationships -- it is not difficult to conclude that an attorney's insured or uninsured status is a material consideration to the client in entering into and continuing that relationship. Indeed, for an attorney to keep silent about having let the insurance lapse seems more likely to "interfere with a healthy attorney-client relationship" (Dr. Ethics' phrase) than would prompt and forthright disclosure. It is surely better for the client to make an informed choice to continue with an uninsured attorney than it is for that same client to get a "nasty surprise" if and when something goes wrong and the relationship deteriorates to the point of a malpractice suit.
For more on LRIS issues, readers are referred to David's archives and his view that Consumers Deserve Better Lawyer Referral Services.
Update: Again through David Giacalone, we are led to this story on three states' rules requiring disclosures of legal malpractice insurance. Slow progress, but steady?
Thank you for pinch-hitting for your ailing web friend. Your readers might also be interested in the ethicalEsq? posting "Yes, Disclosure of Malpractice Insurance Should Be Mandatory," http://blogs.law.harvard.edu/ethicalesq/2003/07/18#a117 which discusses a pro-con article on the topic and the ABA's failure to adopt a disclosure requirement as part of the new model rule of lawyer ethics.
Posted by: David Giacalone | October 27, 2003 at 03:20 PM