Small Law Firms

Will California Lawyers Have To Pay For Malpractice Insurance?

There could be a negative impact on access to justice if lawyers statewide had to raise their fees to cover the costly insurance.

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Ed. note: Please welcome Lyle Moran to the pages of Above the Law. He’ll be writing about developments involving legal organizations in California (e.g., the State Bar of California and the new California Lawyers Association), legal issues the California Legislature takes on, as well as legal education.

California lawyers have begrudgingly paid to be re-fingerprinted in recent months because of the State Bar’s past failure to ensure the retention of their prints as required by law.

But the one-time payment attorneys have shelled out on that front pales in comparison to a potential new annual cost for the Golden State’s 250,000-plus lawyers, that of malpractice insurance.

The State Bar has been evaluating whether to recommend attorneys be required to purchase errors and omissions insurance, a review mandated by the state Legislature.

The bar’s study is in its final stages, with a report due to lawmakers and the California Supreme Court by March 31.

The State Bar’s Malpractice Insurance Working Group has been closely divided about a new insurance requirement, with eight of 14 members present at a meeting earlier this year voting against instituting one.

Those in favor of a mandate have pointed to the need to give members of the public the ability to recoup funds through legal claims if they are harmed by lawyers. When an attorney is uninsured, plaintiffs’ lawyers are less likely to take on a malpractice case against them.

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Some opponents of a malpractice insurance requirement have called the idea a solution in search of a problem and said there is not enough data to justify such a mandate.

Others have raised concerns that there would be a negative impact on access to justice if lawyers statewide had to raise their fees to cover the costly insurance.

In Oregon, the first state to require lawyers to obtain malpractice insurance, the 2019 insurance premium for lawyers was $3,300. Lawyers must obtain the coverage through the Oregon State Bar’s Professional Liability Fund, which provides $300,000 worth of protection to every attorney engaged in private practice in the state. Oregon’s malpractice mandate has been in place for about four decades.

“We consider it a valuable element to our public protection role, assuring that no lawyer operates ‘bare,’ leaving clients fewer options to pursue if they feel harmed by legal error,” said Kateri Walsh, an Oregon State Bar spokeswoman.

The only other state with a malpractice insurance mandate is Idaho, though Washington state is actively studying the issue like California.

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The California bar’s malpractice working group is putting the finishing touches on a report it will present to the bar’s Board of Trustees about the topic.

The bar’s Board, which is expected to discuss the issue during meetings March 14-15 in Los Angeles, will have the ultimate say on what the bar recommends.

A draft of the working group’s final report said the number of uninsured lawyers in California is significant. For example, a 2017 State Bar survey of licensed attorneys found that 30 percent of solo practitioners were uninsured. The same survey said upwards of 3 percent of those working in small firms were uninsured.

The working group has backed a recommendation that an attorney’s lack of malpractice insurance should be included on the lawyer’s profile on the bar’s website.

Currently, California Rule of Professional Conduct 1.4.2 requires lawyers to inform clients in writing if they do not have professional liability insurance, with some exceptions.

The working group also supports efforts to encourage attorneys to purchase malpractice insurance.

The final malpractice mandate recommendation the bar makes will be watched closely by California attorneys, as the agency is also in the midst of seeking legislative approval to raise the basic $315 annual fee lawyers must pay.

The bar has highlighted that the fee has not been hiked in two decades and said an increase is needed to confront large budget deficits. A staff report previously said a 32 percent fee increase of $100 would be needed to balance the bar’s 2020 budget.

As for the re-fingerprinting, the bar estimated the average cost per attorney would be $82. Though there has been frustration from some lawyers that they’ve had to pay for the bar’s mistake, the outcry will be much louder if a malpractice insurance mandate moves forward.

Lyle Moran is a freelance writer in San Diego who handles both journalism and content writing projects. He previously reported for the Los Angeles Daily Journal, San Diego Daily Transcript, Associated Press, and Lowell Sun. He can be reached at lmoransun@gmail.com.

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