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Lawyers split on insurance proposal

If the disclosure of malpractice coverage was mandatory, costs may rise but plaintiffs may select better.

July 02, 2007|Molly Selvin | Times Staff Writer

California lawyers will have to tell their clients whether they carry malpractice insurance under a proposed rule that opponents say could add to the costs of going to court.

About 20% of the state's 150,000 lawyers don't have malpractice coverage, according to Jim Towery, chairman of the State Bar of California task force that drafted the proposed rule. Towery and others who support the rule said most clients want to know whether a prospective lawyer has insurance, or a history of complaints, but many fail to ask.

Opponents fear that requiring disclosure might effectively force all lawyers to buy such insurance and pass on the costs -- up to $9,000 a year -- to clients.

Most of those who lack the insurance are sole practitioners who represent accident or consumer fraud victims.

"They're the people who really provide access to justice, as opposed to tall-building lawyers," said Diane Karpman, a legal ethics expert who predicted that some small practitioners would be put out of business.

The number of disgruntled clients who sue their attorneys is small relative to other types of civil lawsuits but the number of claims is rising, according to an American Bar Assn. study. For instance, legal malpractice cases worth $2 million or more jumped 60% between 1996 and 2003, the latest year for which data are available. In most cases, clients ask for much less, but the number of claims under $10,000 has risen too, by 8% in the same period.

Most legal malpractice claims result from personal injury and real estate cases, according to the study, and close to 70% of these suits were lodged against sole practitioners or members of firms with 10 lawyers or fewer.

"There are so many ways that the lawyer can make an error," said Edith Matthai, a Los Angeles lawyer who generally represents other lawyers in malpractice cases.

Proponents of the rule, including lawyers who handle malpractice cases for plaintiffs, say the requirement would protect consumers whose claims are mishandled.

"Prospective clients should at least know that an attorney chooses to practice without insurance or is unable to get it," said Robert Sall, a Laguna Beach lawyer.

In the '90s, Sall said, he represented an Orange County woman whose divorce lawyer "failed to take the most basic steps to protect the marital assets." The woman's estranged husband squandered hundreds of thousands of dollars before the divorce was final.

She sued the lawyer for malpractice, winning a $450,000 judgment but collecting a tiny fraction of it because the lawyer, who had no liability coverage, filed bankruptcy. The woman, then in her 60s and with meager resources, had to move in with one of her children.

"There are victims here," Sall said.

Some lawyers feel uncomfortable carrying malpractice insurance. Newport Beach plaintiffs' lawyer Mary Shea has never been sued for malpractice but carried insurance for 10 years. Financial and philosophical reasons prompted her to let her policy lapse in 2005.

The premium took a big bite out of her income, she said, and she felt there was an inherent conflict of interest in relying on the same insurance companies she often sued on behalf of wronged clients to defend her if she herself was sued.

The American Bar Assn adopted a model insurance disclosure rule in 2004, and 20 states now embrace some form of it. Several others are considering proposals. The requirement was in effect in California between 1992 and 2000 but the Legislature let the rule sunset during an unrelated dispute over State Bar funding.

The proposed rule would have to be approved by the State Bar's Board of Governors and the California Supreme Court.

The State Bar's comment period closes Aug. 6. To submit comments, go to the State Bar's website at calsb.org, click on "public comment" and search for "insurance disclosure."

molly.selvin@latimes.com

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