State Bar says more data needed before mandating malpractice insurance

The State Bar has been considering mandatory attorney malpractice insurance for nearly a year but needs more data to make the final decision, a working group said Monday. The group’s study comes to an end without a conclusion on whether California attorneys should be required to purchase errors and omissions insurance as a condition of licensing.

“We are where we are,” said working group chair Randall A. Miller in a Monday meeting. “We have, I think, done as complete and comprehensive a job as we can in publicizing exactly what the committee’s doing, and I’m confident that this will be the result of a assiduous and well-thought out process.”

The State Bar’s Board of Trustees will consider the final report when it meets on March 15 before delivering it to the Legislature and California Supreme Court by the end of the month.

“I don’t know what action the Board of Trustees will take on this,” Miller said in the meeting.

Proponents of the mandate argue clients harmed by uninsured attorneys have little recourse as plaintiff’s lawyers tend to be reluctant to pursue claims against uninsured attorneys. Opponents, however, say requiring attorneys to purchase insurance would impose an unnecessary financial burden and raise attorney fees, disproportionately impacting low-income clients.

A 2017 State Bar study found 30 percent of sole practitioners and 3 percent of small-firm attorneys were uninsured, about 13,000 attorneys state-wide.

In a vote earlier this year, eight of 14 working group members voted against immediately instituting mandatory insurance. Members were in “sharp disagreement” over the issue throughout the process, according to a draft report posted on the bar website March 1.

The working group recommended the bar collect more data on the actual risk posed by uninsured attorneys, the likelihood legal aid attorneys would withdraw from practice if required to buy insurance and lower cost insurance options, according to the draft report. But the group unanimously rejected a recommendation that insurance not be required.

In the meantime, the group asked the bar to publicly disclose an attorney’s insurance status on its website, which it currently does not do. Lawyers are required to tell their clients in writing if they are uninsured, under the state’s Rules of Professional Conduct.

The working group also recommended the bar encourage attorneys to purchase insurance and educate the public about the risks of hiring uninsured attorneys through educational campaigns.

Should mandatory insurance be instituted, lawyers likely would be required to carry $300,000 annual coverage, similar to other states, according to the draft report. Insurance premiums tend to more expensive in California, however, because of higher tort liability exposure, according to the report.

Only Idaho and Oregon require lawyers to purchase malpractice insurance, and Washington is also studying the matter. New Jersey studied the issues but decided it would unfairly penalize solo and small firm practitioners while Nevada’s Supreme Court denied a similar petition last year.

In a survey commissioned by the working group last year, 78 percent of respondents said all lawyers should be required to carry malpractice insurance, and 57 percent said they would be supportive even if fees had to increase.

The majority of public comment on the study opposed mandatory insurance due to a lack of data and the financial burden. Sole practitioners and attorneys working low bono or pro bono testified to the working group that if insurance were required, they would be forced to cease practicing law, according to the draft report.

The Board of Trustees will meet later this month to discuss the recommendations. No process or timeline has yet been outlined for collecting additional data.