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Should lawyers be required to tell the public whether they carry malpractice insurance? Yes, according to a model rule that was narrowly approved by the ABA’s policy-making House of Delegates in August of last year. Since then, many states have discussed or adopted variations of the ABA rule, which would require most licensed attorneys to disclose whether they carry — and intend to maintain — malpractice insurance on their annual registration statements. Such mandatory disclosure rules are being hotly debated among lawyers and bar officials. To get some perspective on both sides, Small Firm Business spoke with two advocates from different parts of the country: Bob Welden, general counsel of the Washington State Bar Association; and Lee Sexton, a criminal defense attorney with Sexton, Key & Hendrix in Stockbridge, Ga., and a former president of the Georgia Association of Criminal Defense Lawyers. Welden favors such disclosure rules and in July the Washington state bar sent a proposed rule to the state supreme court for approval. Conversely, last year Sexton lobbied against a disclosure rule that was ultimately voted down by the Georgia bar’s board of governors in November. What follows are excerpts of their debate. WELDEN’S ARGUMENTS IN FAVOR OF MANDATORY DISCLOSURE: � Having malpractice insurance may be a material fact to at least some clients or prospective clients, so lawyers have a fiduciary and professional obligation to disclose whether they have a policy, in case the client does consider it important. � In the handful of states that have had disclosure rules for some time, there has been no marked increased in either premiums or claims made since the rules were adopted. Also, in my state of Washington, people are amazed when we tell them that lawyers aren’t required to be insured. So requiring disclosure wouldn’t lead to an increase in claims, because the public already believes lawyers are insured. � Clients need a neutral third party, such as the state bar, that can be a resource to find out if an attorney carries professional liability insurance, because most are not comfortable asking their attorneys directly. � Mandatory insurance won’t be the next step because insurance companies don’t want to have to insure the risks of all practices, and the state bars and supreme courts don’t want the insurers having power over who can practice law. � A state bar association can post consumer information on its Web site and explain the responsible reasons why lawyers may choose not to have insurance, such as self-insurance or the inability to get insurance in a particular area of law. SEXTON’S ARGUMENTS AGAINST MANDATORY DISCLOSURE: � If the general public was in an uproar over the lack of disclosure, that would be one thing. But it’s not. So why raise the level of consciousness about how much money clients can get if they sue for malpractice? � In effect, the ABA model rule requires lawyers to paint targets on their backs.Nothing forbids a potential or existing client from asking me whether I am insured. But then I get to decide whether or not I really want a client who’s curious about my insurance. Under the ABA rule I wouldn’t find out whether the client checked. � By reporting insurance coverage to the state bar, the issue is publicized and the public then wants to know why lawyers don’t have to be insured. The logical next step is for the state to make insurance mandatory. � A lawyer who chooses not to add the cost of insurance to his or her overhead, and who might otherwise be a fantastic lawyer, is stigmatized for being uninsured. By implication the client is advised to go elsewhere. � The rule is misleading clients because liability insurance policies are claims-made. That is, the insurance company will only pay on the claim if the lawyer has insurance at the time the claim was made, not if the lawyer had insurance when the underlying act took place. If the lawyer no longer has insurance by the time the client actually realizes that the lawyer has committed some kind of negligence, the client is effectively out of luck. Telling the bar that you “intend” to maintain insurance isn’t an enforceable promise that you will do so. MALPRACTICE DISCLOSURE BY STATE Oregon is the only state that requires attorneys to purchase malpractice insurance — it probably will be for the foreseeable future. However, many states have passed, or are looking to pass, rules that would require attorneys to disclose to the public whether they carry insurance. The amount of information requested, and to whom the information must be reported (e.g., state bar or client), varies from state to state. Insurance mandatory: Oregon Disclosure rule (information available to public): Alaska, Illinois, Indiana, Kansas, Nebraska, New Hampshire, North Carolina, Ohio, South Dakota,Virginia, West Virginia Disclosure rule (information kept private by state bar): Delaware, Maine, Michigan, New Mexico, Utah* Rule requiring public disclosure proposed or being considered: Alabama, Arizona, California, Kentucky, Louisiana, Massachusetts, Minnesota, Nevada, Pennsylvania, Rhode Island, Utah, Washington No disclosure rule: Arkansas, Colorado, Connecticut, Washington D.C., Florida, Georgia, Hawaii, Idaho, Iowa, Maryland, Mississippi, Missouri, Montana, New Jersey, New York, North Dakota, Oklahoma, South Carolina, Tennessee, Texas, Vermont, Wisconsin, Wyoming * Utah is also considering a proposed rule that would require public disclosure of insurance information. Source: State Bar Associations as of 8/15/05

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