Talk, Talk, Talk: Background Discussions About the Proposed Requirement for Disclosure of Lawyer E&O Insurance

In November 2007, the State Bar appointed a task force to make a recommendation of whether Texas should require lawyers to disclose the existence or non-existence of professional liability insurance, and, if so, the form of any such disclosure. The Texas task force first surveyed Texas lawyers by e-mail. The survey was reportedly sent via an e-mail blast to Texas attorneys, and then made available on the Bar’s Web site. (See also Memorandum from David J. Beck, Chair, to State Bar of Texas Board of Directors, dated June 11, 2008, regarding Task Force on Insurance Disclosure p. 3.)

According the Task Force, 6,160 lawyers completed the survey, which represented 6.6% of all members of the Texas Bar in 2008. According to the survey, the majority of the lawyers who completed the survey practiced in solo or small law firms, and 77.4% of the lawyers who voted believed lawyers should not be required to disclose whether they have insurance. According to the Task Force, 63.2% of the lawyers who voted in the survey also believed that if disclosure was required, it should be disclosed on the bar’s website instead of disclosed in writing to clients. (See PLI Disclosure – Attorney Survey Findings – February 2008.)

The State Bar also received 138 pages of comments from lawyers in Texas on the final question of the electronic survey. (See “Summary of Findings of Survey Comments” p. 1, available from the State Bar of Texas.) 1605 lawyers (71.9%) who answered the final survey question were against disclosure for reasons including: requiring disclosure would encourage lawsuits against attorneys based on anticipated failure and deep pockets; insurance is too expensive; this will cause insurance rates to go up; lawyers who do not currently carry insurance will have to raise their rates to afford it; other professional are not required to disclose whether they carry insurance; lawyers should be able to choose to be self-insured; and disclosure would hurt small firms and solo practitioners. 118 lawyers (5.3%) who completed the final survey question favored requiring disclosure for reasons including that a client is entitled to know and that disclosure is for public protection. 510 lawyers (22.8%) who answered the final question left comments including that they believed the survey questions were biased; they perceived a lack of suitable coverage especially for solo practitioners or semi-retired lawyers; and practice areas make a difference.

The Task Force also conducted telephone surveys of lawyers and the general public. According to the Task Force, 65% of the 500 lawyers who participated believed that lawyers in private practice should not be required to disclose whether they carry insurance, whereas 70% of the 500 members of the general public who participated believed that lawyers should be required to carry insurance. The Task Force also reported that 75% of the general public also believed that other professions (such as doctors, architects, engineers and accountants) should be required to carry insurance (although none of those professions are required to disclose such information). (See PLI Disclosure Survey of the Public – April 2008.)

Actions after Polling
Based on this information, the 13-member Texas Task Force recommended in June 2008, in a 6-5 vote, that disclosure not be required. The Task Force also voted, 6-4, that if disclosure was required, it should be an administrative rule, not a disciplinary rule, and be reported to the State Bar, not clients directly. (See Memorandum from David J. Beck, Chair, to State Bar of Texas Board of Directors, dated June 11, 2008, regarding Task Force on Insurance Disclosure p. 7.)

In March 2009, House Bill 2825 was introduced by Elliott Naishtat, Representative from Austin in the legislature, which stated the Texas Supreme Court shall: (1) promulgate rules that require an attorney not covered by professional liability insurance to either prominently display a notice in the attorney’s place of business stating he is not covered by professional liability insurance or provide notice in another manner to his clients and prospective clients, and (2) provide for enforcement including disciplinary action for professional misconduct. House Bill 2825 died in the Judiciary and Civil Jurisprudence House Committee.

In June 2009, the Texas Grievance Oversight Committee restudied the reports by the State Bar’s Task Force. The Grievance Oversight Committee recommended that a lawyer in private practice inform his client in writing if he does not have professional liability coverage within limits acceptable to the Bar, and to also notify his client in writing if his insurance lapses or is terminated during his representation of the client. The Committee also recommended that the rule became a disciplinary rule of professional conduct, so that any violation will be handled through the grievance process of the State Bar. (See Excerpt from the Grievance Oversight Committee 2009 Report to the Supreme Court, pp. 1, 2, 4; see also State Bar of Texas Board of Directors Professional Liability Insurance Disclosure Consideration Process 2009-2010.)

For more on this topic, read my articles in Texas Lawyer on disclosure of lawyer E&O insurance: It’s Time to Speak Up: Don’t Miss Out on Debate Over Professional Liability Insurance.

One Response to “Talk, Talk, Talk: Background Discussions About the Proposed Requirement for Disclosure of Lawyer E&O Insurance”

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