| | Dodging a High Cost Bullet—
For Now A little more than a year ago I strongly argued in this newsletter and elsewhere against a proposed new California Rule of Professional Conduct that would have required each California lawyer to disclose in writing at the start of an engagement and on the State Bar web site if the lawyer does not have malpractice insurance coverage. One of my strongest objections was that such a rule would disproportionately penalize the small firms and sole practitioners that make up the majority of State Bar members. Many of these lawyers typically don't earn much more than $50,000 a year, and would find the $4,000-plus annual cost of malpractice insurance to be prohibitive.
In late September the California State Bar Board of Governors defeated this proposal by a 9-8 vote. An amended version of the proposal that would merely delete putting the malpractice disclosure information onto the State Bar's website was then proposed, discussed, and then tabled. The issue will be discussed in November with one-third of the current Board having been replaced by its annual election. This turnover could well be positive because, as was pointed out late in the discussion, the task force that proposed the rule failed to have on its panel any representative of one of the important constituencies most affected by this proposal: the sole and small firm lawyers who are in the trenches and who cannot afford it, and the low- to middle-income clients they serve.
Dodging this bullet still does not change the basic problem. The vast majority of lawyers are ethical and do not commit malpractice. The vast majority of clients do not sue for malpractice. But mandatory disclosure of the absence of malpractice insurance waves a red flag that could spur clients to file actions against the lawyers who are helping them, but simply cannot afford the insurance. A recent front page story in The Wall Street Journal showed just how bad the affordability problem for most lawyers is, by highlighting these facts: - Law school can leave a new lawyer with debts that exceed $100,000
- During the last 20 years the inflation-adjusted growth in the demand for legal services has risen just 1.2% a year—less than half as fast as the overall economy
- According to the IRS, the inflation-adjusted income of sole practitioners has been flat since the mid-1980s
- Yet despite high tuition, low service demand, and flat income, the law schools continue to churn out J.D.s—nearly 44,000 last year, compared to 38,000 in 2002
The conclusion is obvious: Mandatory malpractice insurance disclosure symbolizes a massive cost that most lawyers simply can't afford. And that's why I continue to oppose it.
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"Collecting Your Fee: Getting Paid from Intake to Invoice"
When: November 14, 2007 (10:00 to 11:00 a.m. PT)
Organization: West LegalEdcenter
We all know the consequences to the attorney if (s)he fails to perform according to the community standards of excellence. What are the consequences to the client if payment is not made? How can the lawyer be more assured of payment and what can the lawyer do if the client fails to pay the bill? Is walking away from the bill the only safe thing to do if clients fail to pay?
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Personal Commentary
My new book, Disaster Preparedness & Recovery Planning for Law Firms: A LawBiz® Special Report was written well before the current California disasters. While we may not know what the disaster will be, it is clear that we face and will face future disasters. As I write these words, the fires are coming under control. The damages will be felt by many for years. The disasters here are comparable in scope to other major disasters our country has experienced in the last few years. ...But, then, how can one compare one's sorrow to another's? It really is impossible.
One of my coaching clients in Orange County was housing his daughter and her family after her house burned to the ground and they had to be evacuated. She is an attorney in San Diego. I had a house that, during my travels this month, burned down; the damage was considerable, though unrelated to the current tragedies. When one suffers, it is a personal tragedy that cannot fully be understood by others, no matter how hard they try, no matter how empathetic they may be. But so long as human life is not endangered, we are a step ahead of the game.
Even while not directly impacted by the flames, all Californians are suffering from the current fires. As he was flying across the state, our governor said that at least half of California is covered by smoke. This now makes two major fires—the Zacca fire near Santa Barbara and the current spate of fires—in the last few months alone where I have felt the consequences of breathing the smoke from the fires though many miles away from them. It truly is hard to breathe and all outdoor exercise has come to a halt (if you are rational). We need a good rain, and we're not likely to get it, which is one reason for our current condition.
As one athlete said, there is more than just the game. There is life. And these fires can remind us how lucky we are, even while seeking to focus on the challenges given to us by our clients and the business side of our practices. Thank you for reading my thoughts and best wishes to you as we move toward the holiday season.
Best wishes,
Ed Poll
lawbiz.com
800-837-5880
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