SUBJECT: Proposed New Insurance Disclosure Rules (Revised)

In June 2006, upon recommendation of the Insurance Disclosure Task Force, the Regulation, Admissions and Discipline Oversight Committee (RAD) approved a request to release proposed new insurance disclosure rules for public comment. The Task Force has met and considered the public comments. The Task Force recommends keeping the basic structure of its June 2006 proposal, with modifications to some particular aspects. RAD has considered the April 12, 2007, Insurance Disclosure Task Force – Report and Recommendations upon Return from Public Comment (Board Committee Agenda Item), and has approving the release of the revised proposed insurance disclosure rules for a 90-day public comment period.

PROPOSAL: This is the second time that the proposed insurance disclosure rules are being released for public comment. During the first public comment period, the State Bar received extensive comments on the June 2006 proposal. Those comments addressed a wide variety of issues, ranging from the basic concept of the proposal to suggestions for technical amendments. The Task Force fully considered the public comments received in response to the June 2006 proposal. The focus of this second public comment period is the proposed amendments to the proposed insurance disclosure rules. In summary, the proposed amendments to the proposed insurance disclosure rules are as follows:

1. The proposed rules would be revised to change “covered by” professional liability insurance to “have” or “has” professional liability insurance.
2. The proposed rules would be revised so that disclosure is required if an attorney “knows or should know” that he or she does not have professional liability insurance.
3. The proposed Rule of Professional Conduct would be revised so it applies prospectively only, to new clients and new engagements with returning clients.
4. The requirement for a signed acknowledgment from the client would be deleted from the proposed Rule of Professional Conduct.
5. The rule requiring disclosure to the State Bar would be revised so it requires attorneys to disclose to the State Bar whether they have insurance only when they “represent or provide legal advice to clients,” and related amendments would be made throughout the rules.
6. The title of both rules would be changed to “Disclosure of Professional Liability Insurance.”

The proposed Rule of Court would also be updated to be consistent with non-substantive amendments made to the California Rules of Court, as part of a comprehensive revision effective January 1, 2007, and some non-substantive revisions would be made to the proposed Rule of Professional Conduct.

ANY KNOWN FISCAL/PERSONNEL IMPACT: The fiscal and personnel impact are unknown at this time. The mere adoption of the proposed Rule of Professional Conduct does not involve an unbudgeted fiscal or personnel impact. The cost associated with the new Rule of Court is largely dependent on the mechanism by which the required attorney reporting is accomplished. If the State Bar is required to mail a form to each active member – likely to be separate and apart from the annual fee statement – and each active member is then required to fill out the form and mail it back to the State Bar, there would be additional postage costs and increased staff costs associated with receipt of the information and data entry. If, on the other hand, attorneys are able to enter the information online through the State Bar’s member profile, there would be some programming costs, but they would be relatively minor compared to the costs of manual processing. In either event, there will also be unknown staff costs that are required in order to perform routine compliance, monitoring, and auditing functions.

NOTE: Only written comments will be accepted.

ATTACHMENTS:

•  Insurance Disclosure Task Force - Report and Recommendations upon Return from Public Comment (Board Committee Agenda Item)
• Attachment 1 to Board Committee Agenda Item
• Attachment 2 to Board Committee Agenda Item
• Attachment 3 to Board Committee Agenda Item
• Proposed New Insurance Disclosure Rules (Revised)

SOURCE: Board Committee on Regulation, Admissions and Discipline Oversight

COMMENT DEADLINE: August 06, 2007

DIRECT COMMENTS TO:

Saul Bercovitch
The State Bar of California
180 Howard Street
San Francisco, CA 94105
415-538-2306
415-538-2515 Fax