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Bankrupt, out of business, kaput. That’s the sad message that claimants will get if they try to recover anything from the State Bar of New Mexico’s client-protection fund. The fund, which was established in 1992 to reimburse clients affected by dishonest lawyers, stopped accepting claims on Dec. 31, 2002, and went under at the end of January. To save it, the State Bar had asked the New Mexico Supreme Court to tack on a $15 assessment to its annual dues, but all five justices decided that that was not the way to go, said Christine Halter, interim executive director of the Bar. Until the end of 1998, “it was among, if not the most, generous fund in the country, a 100 percent guarantee,” said just-retired Supreme Court Justice Gene Franchini, who served 12 years on the state’s highest court, two as chief justice. “The insurance premium was payable by our bar.” BREAKING THE BANK From 1992 to 1994, the Bar assessed attorneys $15 a year, then lowered it to $10 for the next two years as Bar membership rapidly grew. “In 1998, an attorney absconded with over $100,000 in client trust funds,” Franchini said, “and that sent the insurance rates up astronomically, several hundred percent. We couldn’t afford it.” Between $60,000 and $70,000 remained in the account. Instead of paying premiums, the money was put in an interest-bearing account. A limit of $5,000 was put on claims, later reduced to $2,500 in 2000. “Then what happened was we kept paying out claims and got down to $30,000, and the Bar wanted to increase dues $15,” Franchini said. “But we knew that was not going to cut it. … In a year, we’d be back to where we were before. So we didn’t allow it.” But new systems will soon be in the works. The retired jurist now chairs a committee that will soon meet for the first time to figure out how clients will be protected in the future. “We’re going to consider a number of things,” Franchini said. He listed four options, none of which will win him the love of struggling solo practitioners, but which the public will appreciate. Three of them add up to mandatory-minimum malpractice policies. Attorneys might form their own insurance company, “much like physicians do in certain places”; band together and go to one insurance company to get a cut rate; or get their own policies, Franchini said. The fourth option is to allow attorneys to choose not to carry malpractice insurance, in which case they would be compelled to notify their clients that they are uncovered. “Also, in the next few months we will have established a client-protection fund, but it will be considerably different than the one we had before,” he said. “Maybe a $10,000 max, maybe it will even go below five.” He did not say how it would be funded.

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