THIS ISSUE

Nevada Supreme Court & Board Of Governors

An Open Letter On The State Bar Of Nevada

AN OPEN LETTER

To The Nevada Supreme Court

&

The Board Of Governors

On The State Bar Of Nevada

By Robert T. Eglet, Esq.

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Andrew Cash

The hypocrisy of not requiring Nevada attorneys in private practice to carry professional liability insurance—or at a minimum, requiring attorneys in private practice who do not have professional liability insurance to disclose this fact, in writing, to all clients and potential clients—is beyond tragic.

What follows are only two out of a dozen or more potential clients over the past 10 years I’ve met with who were the clear victims of legal malpractice in Las Vegas; where their attorneys had no malpractice insurance; and, where the attorneys had no assets, or had assets that were protected by trusts. All but one of those cases involved attorneys either failing to do the simple act of filing the complaint within the statute of limitations period, or failing to timely serve the complaint resulting in the injured victim’s complaint being dismissed. If this has been my personal experience, it begs the question: How many other victims of legal malpractice have there been in our state by attorneys who carry no professional liability insurance, and why do we as a profession that governs our own members allow this to happen?

To open this discussion, I present two key stories.

CLIENT ONE:
In 2008, Client One, a young black man from California met me for an appointment in my office he scheduled two days before. The first thing I noticed about him were his strikingly goods looks. The second? That his left leg had been amputated just above his knee.

For the next two hours he described in great detail the events that caused the loss of his leg. I observed that he was highly intelligent, articulate and blessed with the ability to tell his story in a succinct and chronological order rarely seen in most of my clients. He explained how he was injured in Las Vegas by no fault of his own and through a combination of clearly negligent actions of three separate tortfeasors. He also provided me with documents—accident and incident reports and photographs—that unquestionably supported his view that all three tortfeasors were equally to blame for his injury. He then showed me the insurance coverage information for each of the three tortfeasors. It was a combined liability coverage of $14 million.

My mind drifted toward how to prepare this case, and I started to explain the litigation process in Nevada. He interrupted and said, “Mr. Eglet, I’m not done telling you my story.” I apologized, and he continued….

Client One had hired a California lawyer to represent him. Since she advertised as a competent and experienced personal injury lawyer, he met with her and signed a retainer agreement for her to represent him on a contingency fee basis. She explained that she would need local counsel in Nevada to work with her on his case, and that she knew of a very capable—“perfect”—Nevada attorney with whom she had worked on numerous occasions. He told me the name of the Nevada lawyer (I will refer to him as “Attorney A”).

Later, Client One met with Attorney A and signed a retainer agreement with him, as well. He then handed me a copy of a civil complaint filed in the Eighth Judicial District Court of Nevada. (I immediately saw that the complaint was filed before the statute of limitations deadline and was relieved.) But the relief was short felt. He handed me an order from the district court judge dismissing his case for failing to timely serve the complaint on any of the defendants. Client One then handed me another district court order denying Attorney A’s motion for reconsideration of dismissal and request for enlargement of time to serve. I saw that the order was 12 months old and asked, “Did [Attorney A] appeal the denial of this second order?” I slump into my chair and exhale an audible sigh as Client One says “no.”

Client One told me that he learned this information the day before, and that he tried and failed to get both his California attorney and Attorney A to return his phone calls for over 6 months. He went to his California attorney’s office and found her office closed, with a notice that said, “Out of business.” He decided to go to Las Vegas to confront Attorney A about what was happening with his case. When he did, Attorney A presented him with two orders, saying, “There is nothing more I can do for you.”

Sitting in my office, the young man was in distress. He looked at me and said, “Is there anything you can do to help me?”

I told him that it appeared to be a clear case of legal malpractice and that it is highly unlikely that these two attorneys have anywhere near $14 million in malpractice insurance. Optimistically, however, I went on to tell him they probably have $1 million each. And I explained that I don’t usually accept legal malpractice cases against local attorneys, but under these circumstances I would make an exception.

What I learned next, no one would imagine. I hired a private investigator to track down this California attorney. A week later he called to reveal that the reason Client One’s California attorney’s office had closed was because she had begun serving life in prison. Apparently, she settled several cases for clients for substantial amounts of money, then deposited their settlement checks into her client trust account before transferring the full amount into her own. Then, she hired a man to kill her clients.

This would almost be humorous if it wasn’t true. The California attorney had no malpractice insurance. Nor did Attorney A. Further, an asset review of Attorney A revealed that he had no assets in his name, and what he did have was tied up in a vice-tight trust. When I told that to this nice young man who has been victimized by three negligent tortfeasors and then victimized again by two attorneys—one of whom shared and one who still shares my profession—I felt deeply ashamed of my profession.

CLIENT TWO:
Fast forward 7 years. Client Two, a woman in her early fifties, arrived at my office with an appointment to speak to me. As she began to share her story, it struck me that she was clearly distressed and feeling not only physical pain, but significant emotional pain, as well.

Several years earlier, she was driving to work when a large commercial truck ran a stop sign and broadsided her in an intersection. The accident was severe, and she was taken by ambulance to UMC where she was treated for acute injuries to her spine and head. Ultimately, she underwent multiple spine surgeries that helped, but still left her with life-long disabilities and pain. Her past medical expenses are over $300k, and she will require medical treatment and care for the remainder of her life.

As she began her next statement, I realized I was literally holding my breath as she spoke. She told me that she had been represented by the aforementioned Attorney A since within a couple of months of her accident, and that she’d been trying to speak with him for months about the status of her case but he wouldn’t return her phone calls. Nor would he book an appointment with her. After being frustrated for months, she showed up at his office a few days prior, demanding that his staff give her a copy of her file after telling her he was not available to meet.

I was still holding my breath as she handed me her file and quickly looked for a file stamped “complaint.” There is one. I then looked at the accident report and identified the date of the accident. It was more than 6 years ago. I saw that Attorney A filed the complaint only 2 days before the statute of limitations was to expire. My heart stopped for a beat or two as I read the court order dismissing her complaint for Attorney A’s failure to serve the complaint on defendants within 120 days; his failure to file a request to enlarge time to serve her complaint; and, his failure to do anything to move the case forward in any manner for more than 2 years after filing the complaint.

Finding nothing to show that Attorney A filed either a motion to reconsider or an appeal of the district courts dismissal order, I used my computer to search whether anything has been filed. Nothing. I feel sick to my stomach as I turned back to Client Two to say that it appeared Attorney A didn’t timely serve her complaint. Her lawsuit was dismissed, and Attorney A didn’t file an appeal of the district court’s order in her case. Client Two said that for 2 years, every time she called Attorney A’s office for a status on her case he said he was waiting on an order from the Nevada Supreme Court on an issue… never telling her that her case had been dismissed. Instead, he led her to believe the case was active and everything was fine.

At this point Client Two began to cry and asked me if there was anything I could do for her.I looked further at her file and saw that at least the first level of insurance coverage for the trucking company involved in her accident is well over $1 million. I explained what happened the last time I had a dealing with Attorney A and that I would try to help. Once again, however, Attorney A had no malpractice insurance or available assets. Nevertheless, I decided to accept the malpractice case against him this time out of pure principle.

*****

The Importance and Purpose of Professional Liability Insurance: The History, An Argument, and a Request

Professional liability insurance is important to professionals and clients alike: it can keep you in your profession and out of the poor house. For clients, a professional having liability insurance can be the difference between receiving nothing for their loss, to being compensated for the injury they have suffered because of the professionals’ negligence. Because many professions (prestigious or not) come with the risk of injuring the clients they serve, from pest control to the health industry, most states have numerous professional liability statutes; however, lawyers seem to be the exception. Law is a profession intertwined with nearly all other professions that serve clients and customers, and a lawyer’s negligence can be particularly destructive to clients, many of whom are likely already vulnerable (it’s why they have sought legal counsel in the first place, yes?). The question is why?

Attorney Professional Liability Insurance: The States
Tragically, an overwhelming majority of states do not mandate professional liability insurance for attorneys. In fact, only Oregon requires that attorneys carry professional liability insurance to practice law. The remaining states can be classified into four categories:

(1) States with no law on disclosure of attorney professional liability insurance;
(2) States considering some form of disclosure;
(3) States requiring disclosure on the annual registration statement to the state bar; and
(4) States requiring disclosure directly to the client.

Here is a breakdown of what those categories look like.

1. States With No Law On Disclosure of Attorney Professional Liability Insurance

A minority of states have no disclosure rule regarding attorney liability insurance and they include: Texas, Connecticut, Florida, Kentucky, and North Carolina.

It should be noted that almost every state has some form of client reimbursement fund to repay clients who are victims of attorney malpractice. Many states have their own insurance companies that are managed by the state bar to ensure that professional insurance rates remain low. Nevada is not one of those states.

2. States Considering Some Form of Disclosure

Several states– Maine, New Jersey, New York, South Carolina, Utah, and Vermont–are considering adopting some form of disclosure. However, many of those states have other ways to encourage attorneys to carry professional liability insurance. For example, Maine requires professional liability insurance to participate in the state bar attorney referral program. The South Carolina legislature created a joint underwriting association to keep malpractice insurance premiums affordable to lawyers in high-risk areas of practice.

3. States Requiring Disclosure On The Annual Registration Statement to the State Bar

Some 17 states mandate disclosure to the state bar if an attorney in private practice carries professional liability insurance. Nevada is one of these states.

4. States That Require Disclosure Directly to the Client

Seven states currently require disclosure directly to the client. They include: Alaska, California, New Hampshire, New Mexico, Ohio, Pennsylvania, and South Dakota. These states chose to require mandatory disclosure for four main reasons: (1) Whether an attorney has malpractice insurance is a material fact clients should know when deciding who represents them; (2) Attorneys have a heightened duty as a fiduciary to their clients, and also to the legal profession; (3) Requiring disclosure encourages attorneys to obtain malpractice insurance; and (4) Disclosure gives the state bar better information about the current state of malpractice insurance coverage.

This form of required disclosure is gaining steam because it significantly pressures attorneys in private practice to carry professional liability insurance, while giving attorneys in fields where it is unnecessary (government work) or low-risk (traffic tickets/misdemeanor criminal defense) the freedom not to carry insurance.

Oregon Stands Alone

Oregon is the most progressive state bar in that it eschews a mandatory-disclosure rule in favor of mandatory malpractice coverage. In the 1970s, when faced with an alleged legal malpractice insurance crisis, many state bar associations formed their own insurance programs to compete against the insurance companies. Oregon, however, took the movement one step further by making its bar association’s insurance coverage both mandatory and exclusive. This strategy ensured that everyone participate, and thereby spread the risk.

Oregon did this by first passing a statute at the legislature granting the Oregon state bar– which is governed by the Oregon Supreme Court–the power to mandate liability insurance coverage, and the permission to establish an insurance company. This ensured that any issues regarding separation of powers due to the Oregon Supreme Court’s exclusive jurisdiction to govern the practice of law would be avoided.
It should also be noted that mandatory legal professional liability insurance is currently being argued at the New Jersey legislature.

Professions in Nevada That Mandate Professional Liability Insurance
There are numerous professions in Nevada that require professionals to carry professional liability insurance. The following is a snapshot of some that do.

Fiduciary Professions

As fiduciaries, asset managers and management companies are required to prove liability insurance or sufficient means to act as a self insurer prior to receiving their license (NRS 645H.490). This requirement is fairly new, and likely passed in response to the 2008 financial crisis. The minutes from the legislative hearings on Senate Bill 314 (NRS 684H.490) indicate that the legislation was passed to protect homeowners who were being forced out of their homes by banks without giving proper notice or following proper legal proceedings regarding foreclosure.

Exchange facilitators are similarly required to maintain liability insurance for errors and omissions (NRS 645G.330.) The minutes from the hearing regarding the passage of this statute show that it was passed to protect the public from financial loss, and to ensure that exchange facilitators meet experience and educational requirements for the job. Similarly, banks are required to prove having federal deposit insurance before beginning business operations (NRS 659.085). Financial planners and debt managers are required to carry liability coverage or provide a surety bond for negligence in their duties as a fiduciary (NRS 628A.030).

Non-Fiduciary Professions

Even many non-fiduciary professions require some form of professional liability insurance as a prerequisite for licensure in Nevada. Before an individual can be granted a contractor’s license, they must provide proof of industrial insurance. Nevada passed its Industrial Insurance Act in 1913 under the premise of “economic efficiency and social justice.” This liability insurance covers persons injured on the job due to known dangers of the profession (NRS 624.256). Additionally, contractors that work for the county or state are required to carry additional insurance coverage.

Building inspectors and energy auditors must also provide proof of liability insurance as a prerequisite to licensure (NRS 645D.190). A review of the minutes from legislative hearings on Nev. AB 165 (NRS 645D.190) indicates that the regulation was needed because prior to the bill, it was a “totally unregulated field,” and “unqualified individuals performed tasks which they may not have been qualified to perform.” Individuals were presenting themselves as experts in construction defect without any licenses or education.

Private investigators, private patrol officers, polygraph examiners, process servers, re-possessors, and dog handlers all must provide proof of liability insurance prior to receiving a license. To become licensed to engage in the business of insect, pest and weed control, liability insurance is also required (NRS 555.330). The wording of this statute shows that it was passed to protect the public from loss, injury or damage from spraying chemicals. Franchises, cable TV companies, video service providers, ambulance services and monorail transportation systems all require liability coverage (NV Ordinance Code Sec. 5.01.180). Finally, managers of common-interest communities must carry liability insurance for injuries to tenants (NRS 116A.620).

The Medical Profession

Finally, of course, is the medical profession, which has an all-encompassing malpractice insurance statute that mandates malpractice insurance for any provider of voluntary healthcare services (NRS 629.470). The board that oversees medical malpractice insurance can also require some nurses to maintain malpractice insurance (NRS 632.238).

Chiropractors who do not carry malpractice insurance must provide written disclosure to their patients that they do not maintain coverage (NRS 634.1295). And, persons working in the medical marijuana industry must carry proof of liability insurance as part of the medical field (NV Ordinance Code Sec.6.95.090).

Miscellaneous

There is even quasi-professional liability insurance requirements for professional competition contestants like boxers and mixed martial arts fighters to protect hospitals and doctors from non-payment for medical procedures provided due to injuries sustained in participation in competition events (NRS 467.125).

Complications with Mandatory Malpractice Liability Insurance for Lawyers

One of the complications with statutory mandated liability insurance for lawyers lies in the constitutional structure of state governments: specifically, the principle of separation of powers. Most states, including Nevada, grant the state supreme court “exclusive power to control admissions to the professional bar of this state.” Bennett v. The State Bar, 103 Nev. 519, 527, 746 P.2d 143, 148 (1987); citing Feldman v. State Board of Law Examiners, 438 F.2d 699 (8th Cir. 1971).

There are regulating and licensing powers of the judicial department that are within the province of the judicial function, i.e., licensing attorneys to practice law; prescribing rules of professional conduct for attorneys and judges; disbarring attorneys; promulgating and prescribing any and all rules necessary or desirable to handle the business of the courts or their judicial functions. In short, everything is a proper subject of licensing, controlling and regulating when the authority asserted by the judiciary can logically and legitimately be traced back to, and is derived from, the judicial power. Galloway v. Truesdell, 83 Nev. 13, 422 P.2d 237, 1967 Nev. LEXIS 217 (Nev. 1967).

In Nevada Supreme Court Rule 39, inherent powers of courts provide the following:

Attorneys being court officers and essential aids in the administration of justice, the government of the legal profession is a judicial function. Authority to admit to practice and to discipline is inherent and exclusive in the courts. The supreme court rules set forth in this Part III are the exclusive rules for the governing of the legal profession in Nevada.

A statute mandating liability insurance for lawyers could be argued as violating the separation of powers because it grants insurance companies the power to determine who can practice law. Basically, the second an attorney who is barred in Nevada cannot engage in private practice because insurance premiums are too high, or he is denied coverage, a challenge directly to the Nevada Supreme Court could be brought to invalidate the requirement. This is likely why Oregon created its own insurance company.

The Argument

Think about the hypocrisy of this for a moment. Doctors, many nurses, asset managers, exchange facilitators, banks, financial planners, debt managers, contractors, inspectors, energy auditors, private investigators, private patrol officers, polygraph examiners, process servers, re-possessors, dog handlers, pest controllers, weed controllers, franchises, cable TV companies, video service providers, ambulance services, monorail transportation systems, common interests community managers, and medical marijuana establishments—among many other professions in Nevada—are required to have liability insurance to protect the public from harm caused by these professionals. Yet, Nevada lawyers have no such requirement.

Even chiropractors—who carry no malpractice insurance—are required to disclose that to a patient before they treat them. Yet, lawyers in Nevada are not.

I believe that as attorneys, we have not only an ethical but a moral obligation to our clients (and to the public) to ensure that any harm caused to them by us—or any member of our state bar—does not go unmitigated. We expect our clients to put their trust in us to serve their best interests. How can we credibly expect them to do this while at the same time we are not doing everything possible to protect them from harm that can be caused by us or other members of our state bar? Lawyers, just like all professionals and all people, are not infallible. We make mistakes and will continue to do so. When those mistakes rise to the level of negligence—or cause harm to the consumers of our legal services—it is incumbent upon us to mitigate that harm as much as possible.

The counter argument I’m about to propose may exclude some lawyers from practicing in Nevada because they may not be able to obtain malpractice insurance. However, if a lawyer’s record is so bad that they are unable to obtain malpractice insurance because the risk is too high for the insurer, is it not better that they are precluded from practicing law in Nevada than putting consumers at risk for their malpractice?

The Request

First, mandatory disclosure directly to clients must be enforced. On behalf of the legal consumers of Nevada, I’m requesting that the Nevada Supreme Court (with the support of the Nevada State Bar Board of Governors), amend the Supreme Court Rules regarding Nevada Rules of Professional Conduct to require all attorneys in private practice in Nevada who do not have professional liability insurance in place to disclose that fact in their written retainer agreements with clients, and potential clients. The rule should also require that if an attorney, for any reason, no longer has professional liability insurance, that they shall provide all their clients with written notice that they no longer have professional liability insurance within no less than 10 days from the date they are uninsured. I would also suggest that attorneys practicing solely criminal defense and legal aid attorneys be exempted from this rule.

Second: Regarding mandatory malpractice insurance, I’m requesting on behalf of the legal consumers of Nevada and as a member of the state bar that the Nevada Supreme Court (with the support of the State Bar Board of Governors), create a committee or task force to begin exploring the creation of a not-for-profit professional liability insurance provider for Nevada attorneys to provide competitive low-cost malpractice insurance for its members.

One Final Thought

For the 2017 Nevada legislative agenda, there is discussion about a potential bipartisan bill that may be introduced to increase the minimum liability insurance requirements for drivers in Nevada to $25,000 per person/$50,000 per incident from its current minimums of $15,000 per person/$30,000 per incident, where it has been since 1958. This legislation is long overdue. And yet, how can I or any other attorney in our state credibly testify before the state legislature in favor of such a bill when my profession not only does not require its members to carry professional liability insurance, but does not even require us to tell our clients that we carry no insurance?


Nevada Supreme Court

Robert Eglet has tried more than 120 civil jury trials to verdict, including some of the largest personal injury verdicts in the country in 2007, 2010, 2011, and 2013. Eglet was named National Trial Lawyer of the Year in 2013 by the National Trial Lawyers Association, and National Lawyer of the Year in 2010 by Lawyers USA. He has been honored twice by the Nevada Justice Association as Trial Lawyer of the Year (2005, 2012) and in 2013, Eglet received the National Thurgood Marshall Fighting for Justice Award. The National Law Journal has named Eglet’s firm as one the “12 Best Plaintiff’s Law Firms in the Country” and one of the “50 Best Trial Firms in America.” Eglet lectures regularly on trial practice and innovation in the courtroom.

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