Only one jurisdiction in the nation — Oregon — requires lawyers to carry legal malpractice insurance. But all the other states have varying requirements about malpractice insurance and disclosing whether or not you carry it. Knowing the rule in your jurisdiction is vital to staying out of ethics trouble.
A helpful piece by Prof. Roy Simon, Hofstra University distinguished professor of legal ethics, emeritus, in the Association of American Law Schools Professional Responsibility Section Spring newsletter (subscription required) collects the data and points to the ABA’s comprehensive state-by-state chart.
Ohio, for instance, is one of only seven jurisdictions that require lawyers (with certain exceptions) to inform a client directly if they do not carry a certain level of malpractice insurance. And Ohio lawyers who fail to communicate that fact to their clients have been reprimanded, and even suspended (at least when the failure to disclose is coupled with other misconduct). The other states with disclose-to-clients requirements are Alaska, California, New Hampshire, New Mexico, Pennsylvania and South Dakota.
Disclosing on registration forms
Eighteen other jurisdictions require lawyers to disclose on their periodic registration statements whether they carry malpractice insurance. (See the ABA’s chart for the list.) This is in line with the ABA’s Model Court Rule on Insurance Disclosure, adopted in 2004. The concept behind the Model Court Rule is to provide a potential client with the ability to get access to insurance information, according the report of the Standing Committee on Client Protection, which recommended the rule.
At least four states, according to the ABA’s data, are considering a malpractice insurance disclosure rule — Maine, South Carolina, Utah and Vermont.
Is insurance disclosure a good thing?
Naysayers on the subject of mandatory disclosure question need for it, point to a lack of hard data showing that it benefits clients, and assert that requiring lawyers to disclose whether they are insured unfairly stigmatizes those who are not — or even might encourage claims against those who are.
On the other hand, supporters of mandatory disclosure say that clients should understand the risk involved in retaining a lawyer who is not insured; and absent disclosure, most clients likely assume that the lawyer they hired is insured.
But if you are licensed in the near-majority of jurisdictions with some form of insurance disclosure requirement, this debate is somewhat beside the point. And if your license is in one of the states now considering a disclosure rule, stay tuned. Failing to comply can get you where you don’t want to be — in trouble.