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Calif. Bar Board Members Butt Heads on Malpractice Insurance Disclosure
The Recorder
November 13, 2007
Deciding whether to require that attorneys tell clients when they don't have malpractice insurance is proving extremely difficult for the California Bar Board of Governors.
After a confusing and contentious discussion Friday, board members unanimously punted a controversial proposed amendment back to agency staffers and the Committee on Regulation, Admissions and Discipline to discern whether it would fly legally.
The amendment would clarify when exactly lawyers would have to disclose their malpractice insurance status to clients, by linking disclosure with state Business and Professions Code §6147 and 6148. The codes require attorneys to draft written fee agreements for both contingency and non-contingency work that could cost clients more than $1,000. Exceptions include workers' compensation cases and lawyers working for government agencies.
Based on his visibly irked reaction when the Board of Governors gave the amendment conceptual approval by a narrow 10-9 vote, State Bar President Jeffrey Bleich likely hopes the amendment will eventually get a thumbs down. He huffily denounced the proposed change as "problematic," saying it could allow attorneys to "commit a fraud" by insinuating they're covered by malpractice insurance when in reality they aren't.
For more than a year, State Bar governors have struggled with the issue of mandatory disclosure, which is aimed at protecting the public by requiring uninsured lawyers to fess up to their clients. When the idea was first broached, the State Bar got lots of complaints from attorneys who felt disclosing a lack of insurance could encourage malpractice suits by their own clients, brand them as less professional than insured lawyers and drive up financial costs so much that they risked going out of business.
The extent of the internal debate was exposed in September when members of the agency's Committee on Regulation, Admissions and Discipline were split on mandatory disclosure and then-President Sheldon Sloan broke the impasse with a vote against it. After several amendments floundered at that meeting, the committee referred the issue to the full board for Friday's meeting. That group fared no better, as governors butted heads over the latest amendment, linking disclosure to the Business and Professions Code.
Proponents of the amendment were worried that without that change, attorneys who respond to cocktail chit-chat or friendly phone calls for advice might have to disclose a lack of malpractice insurance in those situations. Some case law, they noted, has stated that contacts as casual as those create a client-attorney relationship.
"We get those calls on a regular basis," said State Bar Governor John Dutton, an attorney from Auburn. Under the proposed disclosure measure, he and others noted, attorneys couldn't provide innocent advice to random callers, but by linking disclosure to a written fee agreement they could.
What bothered Bleich and several others, however, was that 6147 and 6148 also state that lawyers who have had written fee agreements with a client, then later represent them in a matter "of the same general kind," don't have to execute a second fee agreement. That means if the disclosure language is contained in that first agreement, but then the attorney later drops insurance coverage, there would be no second fee agreement making that clear.
Bleich argued the client would be misled.
State Bar Governor Rex Heinke, a partner with Akin Gump Strauss Hauer & Feld who favors disclosure, agreed.
"There has to be some kind of balance between disclosure," he said, "and making it so onerous and impractical that it has bad side effects."
What will ultimately come of the amendments -- or even the idea of disclosure -- remains a mystery. All that's apparent is that it's causing board members and staff one big headache.
