What states require lawyers to have malpractice insurance

Publisher

St. Mary's University School of Law

Abstract

The legal landscape for lawyers’ professional liability in the United States is changing. In 2018, Idaho implemented a new rule requiring that lawyers carry legal malpractice insurance. The adoption of the Idaho rule was the first move in forty years by a state to require legal malpractice insurance since Oregon mandated lawyer participation in a malpractice insurance regime. Over the last two years, a few states have considered whether their jurisdictions should join Oregon and Idaho in requiring malpractice insurance for lawyers in private practice. To help inform the discussion, the article examines different positions taken in the debate on mandatory insurance and recent empirical research related to uninsured lawyers and legal malpractice litigation. The article focuses on arguments in favor of mandating insurance and considers approaches that may address particular concerns expressed by those who oppose requiring lawyers to carry professional liability insurance. The article also considers select alternatives to mandatory insurance. After concluding that mandatory insurance better promotes public and lawyer protection than the alternatives, the article examines reasons why decisionmakers fail to require that lawyers carry a minimum level of insurance. Drawing on ethics scholarship and behavioral psychology research, the article notes that individual uninsured lawyers may fail to see the consequences of their conduct because they have a blind spot. The conclusion also suggests that the bar and judiciary may suffer from a collective blind spot that contributes to lawyers and judges not seeing financial accountability as an ethics issue. The conclusion urges lawyers who are insured to address the blind spots and promote their states joining Oregon, Idaho and countries around the world that recognize that financial accountability is a hallmark of an ethical profession.

Recommended Citation

Susan S. Fortney, Mandatory Legal Malpractice Insurance: Exposing Lawyers' Blind Spots, 9 St. Mary's J. on Legal Malpractice & Ethics 190 (2019).
Available at: https://commons.stmarytx.edu/lmej/vol9/iss2/1

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Beginning next year, lawyers who don't carry malpractice insurance will have to complete a four-hour assessment of their ethical knowledge and management practices.

Each year, the ARDC requires Illinois attorneys to report whether they or their firms carry malpractice insurance. That information is made public via the ARDC's website, although a prospective client may not know the website exists, let alone that it provides such information. On January 25, 2017, the Illinois Supreme Court amended Rule 756(e) by implementing "proactive management based regulation" (PMBR). The new rule will require attorneys who do not carry malpractice insurance to complete a four-hour interactive, online assessment of the operations of their firm. The assessment is based on both ethical rules and best business practices. It will be conducted every two years, beginning in 2018. For more about PMBR, see the June 2016 Illinois Bar Journal cover story.

According to James Grogan, the ARDC's Deputy Administrator and Chief Counsel, 41 percent of solo practitioners in Illinois do not carry malpractice insurance. There are roughly 13,500 solo attorneys in the state, which means some 5,500 practice uninsured. What's more, nine percent of small firms do not maintain malpractice insurance policies.

The vast majority of jurisdictions do not require that lawyers obtain insurance. Some, however, like Ohio, require uninsured lawyers to give specific written disclosures to prospective clients, Grogan says.

Regulators are concerned about young attorneys with large debt loads and little opportunity to find work, he says. Not only are they less likely to carry insurance, but they are also more likely to take on work outside their comfort range due to financial pressures.

Solos also lack the safety nets that help keep lawyers in other practice settings from committing malpractice. Large law firms have their systems evaluated by their insurers before a policy is issued, for example. The PMBR system was designed to focus on the lawyers most at risk of an ethical mishap.

Not subject to discovery

There is no cost to performing the assessment. It can be done in shorter increments instead of in one four-hour chunk. Practitioners who take the assessment will receive four hours of CLE credit for doing so. Even those who do carry insurance are encouraged to self-assess; they'll also receive the CLE credit if they do so. Perhaps most important is that the assessment responses and any other data obtained will be confidential.

None of the collected data will be subject to discovery. Once the assessment is complete, the ARDC will provide the attorney with a list of available resources to help address any issues identified during the process.

Grogan says that the ARDC is currently working on the scripts and checklists it will use to guide the assessments. Illinois is the first jurisdiction in the United States to require PMBR, so there aren't many U.S.-based models to examine. Grogan notes that Colorado has a voluntary system. So far, the most successful PMBR implementation has been in South Wales, Australia, where complaints against attorneys dropped 66 percent after its implementation.

The ARDC knows what subjects it wants to address and is now looking at how to best instruct attorneys. The program is intended to be user-friendly and content will change every two years. The ARDC's goal is to "offer assistance dynamically for a new generation of lawyers."

The PMBR system is not designed to sell insurance, Grogan stresses. By encouraging lawyers to use checklists and other assessment tools, it puts them in the mindset of analyzing their practices like an insurance company would - by assessing overall risk and identifying opportunities to improve. Ultimately, Grogan says, PMBR is designed to build better lawyers and set them up for success.

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Does Florida require malpractice insurance for lawyers?

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