Is mandatory malpractice insurance coming to California?

As we enter fall, David Bowie's "Changes" comes to mind. Indeed, the new California Rules of Professional Conduct become effective on Nov. 1. In addition, the 2017 State Bar Funding Bill, as you may recall, was historic. It separated the Sections out from the State Bar into what is now called the California Lawyers Association. With this separation, the State Bar is no longer a trade association for lawyers. Rather, its focus now is primarily on licensing and discipline. But that may soon change.

Last year's funding bill contained some provisions that few lawyers are aware of -- even lawyers who are in the business of defending other lawyers. For example, Senate Bill 36, Section 26, added Section 6069.5 to the Business and Professions Code. This new section authorized the State Bar to conduct a "review and study" regarding malpractice Insurance for attorneys licensed in California.

The State Bar was tasked with reviewing and studying:

(1) the adequacy, availability and affordability of errors and omissions insurance for attorneys;

(2) proposed measures to encourage attorneys to purchase errors and omissions insurance;

(3) the ranges of malpractice policy limits to determine what levels best protect the public;

(4) whether the current Disclosure Rule 3-410 (which requires written disclosure of the lack of insurance) is adequate and effective, or if it needs to be modified or abolished;

(5) whether there should be mandatory insurance for all attorneys; and

(6) any other possible measure that would advance the goal of protecting the public.

Pursuant to the legislative mandate, the State Bar created a task force to study these issues. It must present a report to the State Bar Board of Trustees, which must submit a report to the Supreme Court and the Legislature by March 31, 2019.

The task force, aptly named the Malpractice Insurance Working Group, has 19 members from various areas of the law, the bench and public. The working group has met four times so far this year and its next meeting is scheduled for Nov. 13 in Los Angeles. The final and only other meeting will take place in January 2019.

There has not been much publicity about what the working group is doing, but there should be. Many people believe the group is on a mission to find "a solution in search of a problem." Some observers believe that the working group is predisposed to finding that there should be a requirement that all attorneys licensed and practicing in California should carry malpractice insurance. Currently, two states (Oregon and Idaho) require malpractice insurance, and Nevada is considering it. Conversely, New Jersey, New York and Texas, in recent years, have rejected the idea of mandatory insurance. California has previously considered mandatory insurance and rejected the idea each time the issue was raised. There has also been a discussion about requiring minimum coverage limits.

Mandatory insurance obviously is not without controversy. Many pro bono and low-bono attorneys believe that mandatory insurance will negatively affect their ability to offer legal services and, in turn, the public's access to justice. Although some criminal attorneys carry insurance, many don't and see no reason why they should be forced to. After all, per Coscia v. McKenna & Cuneo, 25 Cal. 4th 1194 (2001), exoneration by post-conviction relief is a mandatory precursor to seeking recovery. More concerning is the working group's flirtation with creating a captive insurance carrier through which all attorneys must purchase their malpractice insurance. This carrier could be run by the State Bar. Oregon is the only state with a captive carrier through which all attorneys must purchase a malpractice policy; all attorneys in Oregon are required to purchase a $300,000 policy for $3,500.

The working group is studying what the minimum policy level should be in California ($500,000? $1 million?) and what the cost of the policy should be ($7,500? $10,000?). At its November meeting, the working group will study the advisability of mandatory insurance and implementation of a State Bar-run captive carrier for all attorneys. At that meeting the working group is scheduled to hear speakers from Oregon's captive carrier and from representatives from several Canadian provinces that have mandatory insurance and bar-run captive carriers. There is also supposed to be a speaker who will discuss how a captive carrier was created for the UC system.

Public

Comment

The State Bar's Board of Trustees has issued an informal request for public comment regarding issues being discussed by the working group. The public comment period runs until Nov. 5. If you are interested in commenting, you can send your comments to Linda Katz (State Bar of California, 180 Howard St., San Francisco, CA, 94105 or linda.katz@calbar.ca.gov). You can get more information on what's being discussed by checking out the State Bar website.

In conclusion, most lawyers in California are unaware of the existence of the Malpractice Insurance Working Group and the nature of what it is considering. So take a cue from Tom Petty's "I Need to Know" and find out more, before you possibly learn down the road that not only must you have malpractice insurance, but that you potentially have to buy it from the State Bar's own captive carrier.