Malpractice Insurance & Legal Ethics

Today on his Professional Responsibility Blog, Professor Alberto Bernabe reports that the New Jersey Supreme Court declined to require all lawyers to carry professional liability insurance.  As Professor Bernabe notes, Professional Responsibility: A Contemporary Approach originally reported the NJ development.  A summary:

  • NJ will not require all lawyers to obtain coverage;
  • NJ will retain an existing rule that requires limited liability corporations to carry insurance of at least $100,000 per claim multiplied by the number of attorneys in the firm;
  • Once administrative rules & regulations are developed, NJ will require attorneys to file evidence of the insurance that they carry, with the filings available to the public; and,
  • NJ will table, for now, discussion whether to require lawyers who do not carry liability insurance to disclose that fact to prospective clients.

Vermont does not mandate malpractice insurance.  The issue, however, interests me.  I’m particularly intrigued by the connection, if any, between Rule 1.4 and malpractice insurance.

Rule 1.4 requires a lawyer to “explain a matter to the extent reasonably necessary to permit the client to make informed decisions regarding the representation.”  Consider:

  • can a client make an informed decision to hire a lawyer without knowing whether the lawyer carries malpractice insurance?
  • if a client asks, and the lawyer says “yes, I have malpractice insurance,” must the lawyer inform the client if, for whatever reason, coverage stops or is not renewed?

Last fall, Bloomberg Law posted Avoiding Accountability: The Rise of Mandatory Malpractice Insurance and DisclosureWith respect to mandating coverage, the article sets out the pros, cons, and a middle ground that has emerged.  Per the post:

  • Pros:  protects the public, provides accountability.
  • Cons:  cost prohibitive, will encourage more claims.
  • Middle ground: do not require insurance, but require lawyers to disclose whether they have it.

I assume the discussion will continue.

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