Proposal to require Vermont lawyers to disclose whether they carry malpractice insurance is published for comment.

The Vermont Supreme Court recently published for comment a proposal to require lawyers to disclose their malpractice/professional liability insurance status on the attorney licensing statement. The proposal would not require lawyers to carry coverage, only to disclose whether they do. The Court Administrator’s Office would make the responses public. Government attorneys, in-house counsel, and lawyers not on active status would be exempt from the disclosure requirement.

The proposal is here, under the heading “Proposed Order Amending A.O. 41 § 4 and adding § 18.”  Send comments to me. The comment period closes on June 20, 2022.

Background

A few years ago, a disciplinary complaint was referred to an assistance panel for non-disciplinary resolution. The assistance panels are the Professional Responsibility Program’s version of diversion. For lack of a better phrase, an assistance panel is where complaints go when they’re too serious to dismiss, but not serious enough to warrant a disciplinary prosecution.

By rule, at least one member of each assistance panel must be a non-lawyer. In this matter, the non-lawyer asked the respondent something like “I assume you’ve notified your carrier about this.”  The respondent replied that they did not have professional liability insurance. The non-lawyer was surprised, having assumed that Vermont lawyers are required to carry coverage. They are not. The Professional Responsibility Board became aware and, eventually, formed a joint committee with representatives from the Vermont Bar Association.

The committee met throughout 2021. The committee heard from several lawyers and studied other jurisdictions’ approaches. The committee considered four options. One was to maintain the status quo. The others were whether to recommend that the Court:

  1. require lawyers to disclose their insurance status on the licensing statement; or,
  2. require lawyers to disclose their insurance status directly to clients; or,
  3. require lawyers to carry malpractice coverage.

In the end, the committee chose to recommend that the Court require lawyers to disclose their insurance status on the licensing statement. The committee presented the recommendation to the PRB and the Vermont Bar Association Board of Bar Managers. Each Board voted to forward the recommendation to the Court.

Again, comments should be sent to me. The comment period closes on June 20, 2022.

For those interested in more information, read on.

Survey Responses

The committee surveyed the bar. 269 lawyers responded.

  • 80% reported having coverage.
  • Asked whether lawyers with active licenses should be required to disclose whether they carry malpractice insurance, 76% responded “yes,” 24% responded “no.”
  • Asked whether lawyers with active licenses should be required to carry malpractice insurance, 64% responded “yes,” 36% responded “no.”

The survey included questions that called for narrative responses. I apologize that this isn’t the best format, but here are compilations of responses to those questions.

Other Jurisdictions

This chart summarizes each state’s approach to legal malpractice insurance. The various approaches fall into each of the four categories outlined above. I’ll address the categories in reverse.

  • Mandatory Malpractice Coverage

Oregon and Iowa require lawyers to carry malpractice insurance.

  • Mandatory Disclosure to Clients

A handful of states require lawyers to disclose their insurance status to clients, or to notify clients if their coverage is less than (or falls below) a certain amount: Alaska, California, New Hampshire, New Mexico, Ohio, Pennsylvania, and South Dakota.

For example, for lawyers across the river, here’s Rule 1.19 of the New Hampshire Rules of Professional Conduct.

  • Mandatory Disclosure to the Licensing Authority or State Bar

This is the option proposed in Vermont. Several states take this approach: Arizona, Colorado, Delaware, Florida, Hawaii, Illinois, Kansas, Maine, Massachusetts, Minnesota, Nebraska, Nevada, Rhode Island, Virginia, West Virginia, and Washington.

For example, in Massachusetts, the disclosure is made on the licensing statement and the information is publicly available by selecting the “Look Up An Attorney” tab on the Board of Bar Overseers website.

  • No requirements.

The remaining states either have no requirement or a requirement that is not specific to lawyers. For instance, there are some states in which state law requires all limited liability corporations to carry professional liability insurance. In those states, law firms are subject to state law.

  • Other

A few states have their own twists. Illinois does not require coverage but requires disclosure on the licensing statement. Illinois lawyers who are not exempt and who do not have coverage must complete a four-hour self-assessment. In Montana, lawyers are not required to carry insurance but those who don’t are not eligible to participate in the bar association’s lawyer referral service.

Scope of Coverage in Vermont

The committee was not able to determine the number of Vermont lawyers in private practice who do not have insurance. Based on the information provided to the committee, the committee is confident that a high percentage are covered. Indeed, of the 269 who responded to the survey, 80% reported having coverage. The best estimate is that there are approximately 300-350 Vermont lawyers in private practice who do not carry malpractice insurance.

Conclusion

To reiterate, the proposal is to require lawyers to disclose whether they carry professional liability insurance. Government lawyers, in-house counsel, and lawyers not on active status would be exempt.

To comment, email me. The comment period closes on June 20, 2022.

legal ethics

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