MyShingle : Solo and Small Law Firm Management and Marketing

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.

The MyShingle View

As my readers probably know, I strongly believe that all attorneys should have malpractice insurance as I've stated here and here. And clients should have some mechanism of discovering whether an attorney is insured or not.  I'm not sure that the best way to inform clients is for attorneys to volunteer the information if only because that can be awkward (by analogy, most attorneys don't usally tell clients that they're a member of the bar; it's simply presumed).  But as with bar membership, a client should at least be able to obtain information on whether an attorney has malpractice through a bar website. 

One thing that did trouble me in reading over the list of malpractice pros and cons is the possibility that mandatory disclosure could lead to higher malpractice rates.  Weldon states that there haven't been "marked increases" in Washington where mandatory disclosure is required.   I hope that there won't be a large cost to something that can benefit consumers.