By TERESA Y. WARREN, Special to the Daily Transcript

The State Bar of California is tightening the disclosure rules for attorneys who elect not to carry professional liability insurance. Soon the California Supreme Court will review Proposed New Rule 3-410 of the California Rules of Professional Conduct. If approved by the court, the new rule will require all California attorneys who do not have professional liability insurance to inform a client at the time of the client's engagement that they do not carry such coverage. If an attorney elects to discontinue professional liability coverage, clients must be notified within 30 days. The required notices must be provided to the client in writing and apply to all new clients and new engagements for existing clients.

Estimates put the number of attorneys throughout the state practicing law without professional liability coverage at 20 percent. It is assumed that many lawyers opt to go without insurance due to cost.

"There are strategies that a firm or sole practitioner can use to best position their risk and ensure they are presented with the most competitive premium and comprehensive program," said W. Brian Ahern, president of San Diego-based Ahern Insurance Brokerage, an insurance brokerage firm specializing in the insurance needs of law firms.

He notes, however, that obtaining insurance shouldn't be just about getting the best price. Consideration should be given to the carrier rating and financial size, policy form and the company's reputation and how it handles claims.

Bar-endorsed programs

Finding affordable coverage may be as simple as turning to your local or specialty bar association. Many bars have partnerships with leading insurance companies and brokers that provide significant cost savings to members. The San Diego County Bar Association (SDCBA) offers comprehensive coverage not available on the open market. Members report saving as much as 10 to 20 percent with substantive coverage enhancements.

One strategy for minimizing insurance costs is to look for additional benefits offered within a program. Under the SDCBA program, law firms that employ a full-time legal administrator can receive additional credits on their premiums. Credits are also given for attending MCLE risk management seminars and for having attorneys that are certified legal specialists.

Positioning the risk

Positioning your practice in a way that appeals to insurance underwriters is key to maximizing savings. Disclosing as much information as possible about the attorneys in your firm, your practice management procedures, the services provided, the skills you've developed and even previous malpractice claims can make a big difference in how an insurance underwriter views your potential risk.

Attorneys roles

In the eyes of insurance companies, not all attorneys are equal. When applying for professional liability insurance, be sure to indicate which attorneys are full time, part time or of counsel. Indicating the number of hours an attorney bills can save you from being charged a full rate for attorneys working less than full time. If your firm has of counsel attorneys, define what their role is within your organization, how many hours they bill, whether they have their own letterhead or use the firm's, and whether they carry their own coverage.

Good practice management

"Underwriters want to see that your firm is well managed," Ahern said. He advises you provide the insurance company with a description of your client intake methods that demonstrate that you "understand who your client is" before you are engaged. Also provide well-crafted engagement and disengagement letters, and show that your firm has a good conflict check system in place. If your firm has trust accounts, Ahern advises that you use "evergreen" retainer agreements, which require a minimum balance be maintained within the trust.

Note what seminars your firm attorneys attend that contribute to their practice and risk management skills. Underwriters want to see that attorneys are striving to make themselves better lawyers.

Money management

Be diligent about your accounts receivable. Underwriters don't want to see that your clients owe you significant amounts of money. If you find yourself in that position, explain why and the methods you are using to collect the funds. According to Ahern, when attorneys sue clients for fees, there is a strong likelihood that the client will file a cross-complaint for malpractice.

Previous claims

If your firm has a previous malpractice claim, it is important to disclose to an insurance carrier what risk management procedures you have put in place to avoid future claims and explain in detail why another claim is unlikely. If the claim was ill-founded, specifically state why.

Firm services and the Web

Unique and unusual services can be a red flag to an insurance underwriter. If your firm does offer services out of the norm, provide a detailed explanation of the services, suggested Ahern. He also advised that the skills you state on your insurance application mirror those on your Web site.

"Web site text can be held as misrepresentation in a malpractice claim, so accurately and thoroughly state what you do," he said.

Application = Marketing

Ahern advises law firms and sole practitioners alike to think of the insurance application as a marketing document.

"Provide a reflection of who your firm is and take pride in who you are," he said. Also take the time to properly complete the application. Careful and thorough completion could result in significant cost savings.

Ahern Insurance Brokerage (AIB), one of the largest independently owned insurance brokerage firms specializing in the insurance needs of law firms, has more than 16 years experience in professional liability coverage insuring over 2,000 law firm clients.

About Ahern Insurance Brokerage
Ahern Insurance Brokerage (AIB) is an independently owned insurance brokerage firm specializing in the insurance needs of law firms. With a philosophy founded on building long-term business relationships, AIB and founder W. Brian Ahern have been providing Professional Liability Insurance to attorneys for over fifteen years. As a result of this considerable experience, AIB has developed strong industry partnerships that enable the firm to provide its clients with superior service, professional representation, and the ability to deliver the most comprehensive programs at the most favorable premiums. For more information on AIB, please visit the Ahern Insurance Brokerage website.