Tuesday, November 13, 2007
Board of Governors Keeps Insurance Disclosure Rule on Hold
By STEVEN M. ELLIS, Staff Writer
The State Bar Board of Governors amended a proposal requiring direct client notification by attorneys who lack malpractice insurance to require disclosure only when a fee agreement is necessary, but has referred the matter back to staff for review of whether the changes require further public comment.
The board took the step during its meeting on Friday upon the suggestion of State Bar Jeffrey L. Bleich, who raised concerns that the board’s vote to link the disclosure requirement in proposed California Rule of Professional Conduct 3-410 to the written fee agreement requirements in Secs. 6147 and 6148 of the Business and Professions Code created exceptions that could lead to fraud.
As originally set forth, the proposal would also have required attorneys to disclose to the State Bar whether they had malpractice insurance, and that uninsured attorneys be identified on the State Bar Web site. However, inclusion of the latter requirements proved to be a sticking point at the board’s previous Sept. 26 meeting in Anaheim, so the board decided Friday to concentrate solely on the client disclosure aspect.
Proponents of a link between disclosure and fee agreements, including board member John J. Dutton, asserted that the existing requirements that client disclosure be in writing and given at the time of engagement raised compliance problems for attorneys giving advice in a “cocktail party” situation and over the phone, including attorneys staffing hotlines for victims of the recent wildfires.
However, some members, including Bleich, said they were were troubled that the link would import exceptions from the fee agreement requirement to the disclosure context. Under the statutes, a written fee agreement is not required where attorneys accept workers’ compensation cases on contingency, a client is a corporation, or an attorney previously rendered similar services to the client for which the client paid.
Bleich noted that the latter exception could give rise to fraud issues by allowing an attorney who loses or drops malpractice coverage to deceive a client relying on the attorney’s previous representation of coverage. He also noted that the extent of the changes might require another round of public comment.
As a result, the board adopted the amended language by a vote of 10 to nine, but agreed to refer the matter back to staff to determine whether further public comment was necessary.
In separate actions, the board also approved a proposal to appoint three governors to a task force to coordinate with the Rules Revision Commission in order to identify potential problems and resolutions at an early stage, and noted that petitions to run for a seat on the board will be available Feb. 1 and due April 1.
However, it declined to take action on a statement that Bleich proposed to issue in his capacity as president, and on behalf of the board, in support of lawyers in Pakistan who are protesting the imposition of emergency rule by Gen. Pervez Musharraf.
Despite Bleich’s contention that the statement was not political, some members were concerned that it could be misconstrued and mischaracterized by interest groups who are adverse to the State Bar.
The board briefly considered a motion to strike the reference to the board from the statement, but took no action after determining that any action to ratify the statement without the reference to the board would have the practical effect of reinserting the language.
Copyright 2007, Metropolitan News Company