Legal Ethics Corner

Ethics Corner is designed to present ethical issues that practitioners might well face on a daily basis. It is a service of the Legal Ethics Committee of the San Diego County Bar Association for SDCBA members.  

New Disclosure Requirement re Lack of Malpractice Insurance
 
In California an attorney must disclose whether s/he maintains malpractice insurance, right? Wrong, but this is kind of a trick question. Confusion over this issue is understandable. In the past, California required a written disclosure of whether one maintained malpractice insurance. This was later changed to having to disclose that one did not have malpractice insurance, but this requirement sunsetted back in 2000. Now, a new day is here, and it looks much like the prior one. Newly enacted Rule of Professional Conduct 3-410 (operative January 1, 2010) requires that when a representation “will exceed four hours,” and the attorney knows or should know that s/he does not have professional liability insurance, this must be disclosed in writing at the time of engagement, or in the case of no longer having such insurance, within 30 days of when the attorney knows/should know that the coverage is no longer in effect.  The rule applies to new clients and to new engagements with returning clients.
 
The rule does not apply to government and in-house lawyers who are rendering legal advice in that capacity, but it still applies to outside lawyers who represent private and governmental entities, as well as to counsel hired by an insurer to represent an insured. The rule does not apply to legal services rendered in an emergency to avoid foreseeable prejudice to a client’s rights and does not apply where the attorney has already advised the client that s/he does not have professional liability insurance. 
 
The rule does not state that the disclosure must be made to an existing client on an existing matter. However, as a cautionary step, attorneys without malpractice insurance might want to consider whether they will do so.  Also, what is certain is that the disclosure must be made for “new engagements with returning clients.” While some circumstances might be in the gray zone as to whether they are “new engagements,” given that the general idea behind the statute is client protection, attorneys are better off making the disclosure if there is any doubt. In either case, while representing an existing client the review of a contract for a new transaction, the filing of a new case, the amendment to a long existing will, and similar circumstances, are likely sufficiently different engagements so as to require the disclosure. 
 
So, no more trick questions and no more trick answers; if you do not maintain malpractice insurance, or if it has lapsed, you generally need to disclose the same in writing. See new Rule of Professional Conduct 3-410 here.
 
--Luis E. Ventura
 
**No portion of this summary is intended to constitute legal advice. Be sure to perform independent research and analysis. Any views expressed are those of the author only and not of the SDCBA or its Legal Ethics Committee.**