There are many views pro and con about the State Bar's proposed rule requiring lawyers have malpractice insurance. But there is a bigger problem with the proposed rule as written—if you have malpractice insurance, it almost certainly does not comply with the proposed rule and you probably cannot buy insurance that does.

Proposed Rule 210(a) states: “All active members of the State Bar of Georgia engaged in the private practice of law in Georgia must be covered by a policy of professional liability insurance, in an amount no less than $100,000 per occurrence and $300,000 in the aggregate, the limits of which are not reduced by payment of attorney's fees or claims expenses incurred by the insurer for the investigation, adjustment, defense, or appeal of a claim.”

There are at least two fundamental problems with this proposal: First, professional liability insurance is written on a “claims made” basis and not on an “occurrence” basis (in contrast to typical commercial general liability coverage). Thus, the limits are stated on a “per claim” basis (not “per occurrence”). Second, for claims made policies, defense costs and claims expenses always (at least in the policies I have reviewed) reduce policy limits. Accordingly, the proposed rule does not reflect what, to my knowledge, is available in the insurance market.

Thus if a large law firm has a professional liability policy underwritten by Lloyd's syndicates on a typical policy form with $100 million per claim/$100 million aggregate policy limits, it would not comply with the proposed rule because the limits are not “per occurrence” and defense costs erode limits. I am quite certain that this is not what the State Bar had in mind when it proposed the rule, but the law firm with the hypothetical policy (and its lawyers) would technically be in breach if the proposed language is adopted.

As lawyers, we know that technicalities matter and that the “devil is in the details.” The details of this proposed rule do not appear to have been well-considered. As a result the Bar should either table and reconsider the rule after appropriate amendments—hopefully with input from coverage counsel and insurance brokers to reflect coverage available in the market—or vote it down in its current state.

John Watkins

Atlanta