By Jim Ash
“Litigation cost protection” insurance reimburses an attorney up to the insured amount of costs advanced to the client only if the case goes to trial and there is zero recovery. Promoters say it gives sole practitioners and smaller firms the ability to go after deep-pocket defendants.
At its January 26 meeting in Tallahassee, the board voted 23-17 to allow attorneys to pass along the cost of the premiums to their clients, but only with informed consent and after extensive disclosure.
Under the policy at issue, premiums are 7 percent of whatever amount of coverage the attorney requests, or $17,500 if the attorney opts for the maximum coverage of $250,000.
Critics argued it doesn’t pass the “smell test” because the attorney is the only direct beneficiary. But supporters counter that there’s nothing wrong with asking a client to pay for a product that puts more experienced lawyers and expert witnesses within their reach.
Board member Dennis Kainen argued the insurance gives consumers greater access to litigation specialists, including medical malpractice experts who have just struck out on their own and can’t finance large and complex cases.
“This is a situation where you can have your cake and eat it, too. You can serve your client by taking the case to trial because you can afford $250,000 to beat up that insurance company that doesn’t want to pay,” Kainen said. “And, you can help yourself and make a little bit of money too, because we are in a profit-making business, serving the public.”
The board vote reversed a Professional Ethics Committee decision last fall that forbade passing along the cost.
Instead, Bar staff has been directed to issue an advisory opinion that calls for tight guardrails and reflects the deep concerns expressed by many board members, including several members of the Board Review Committee on Professional Ethics. The BRCPE voted 4-3 to allow the pass through, but also with certain conditions.
The board’s final proposed opinion calls such arrangements “a close question because the circumstances described create potential conflicts of interest between the lawyer and client throughout litigation.”
It goes on to list eight conditions, including that the lawyer makes “an objectively reasonable determination that the litigation cost protection insurance serves the client’s best interest.”
It also requires lawyers to: inform the client that other attorneys may offer contingency fee arrangements without passing along the expense of the litigation cost insurance; fully explain the insurance and why it’s in the client’s best interest; give the client a copy of the policy and advise him or her to get another attorney to review it; not allow the terms or availability of coverage to “adversely affect their independent, professional judgment, the client-lawyer relationship, or the client’s best interest.”
BRCPE Chair Michael Hooker of Tampa voted with the minority not to allow the pass through.
“Litigation cost insurance does not constitute a court cost, it’s not an expense of litigation, it’s not a cost of obtaining or presenting evidence,” Hooker said. “It’s not a category of cost that would be recoverable as a standard item of cost in the event you win a case.”
Some critics said they were worried the insurance would encourage risk-taking and others wondered how such arrangements address the appeals process.
But most agreed the central issue turned on whether, and to what degree, the insurance benefits the client.
Board member Joshua Chilson, a plaintiff’s attorney from Clearwater who specializes in personal injury, said he believes clients would benefit most because the risk of a big financial loss forces him to regularly turn away potential plaintiffs.
“We’re dealing with insurance companies that write unlimited checks and I think the deck is already stacked against my clients,” Chilson said.
More importantly, Chilson said, the insurance eliminates an “inherent” conflict of interest built into every contingency case, financial pressure to skimp on expert witnesses and other costs.
“If I have a case where I’ve invested $100,000, or $200,000, which I have had, in the back of my mind, I’m thinking about those costs,” Chilson said. “And that is not always in the best interest of my client.”
President Michael Higer appeared skeptical about the insurance product’s ability to increase access.
“Wouldn’t you want some data to show that lawyers wouldn’t be willing to take these cases but for this safety net?” Higer said.
Some board members said the issue is such a close call, the debate changed their minds. Kainen urged supporters not to reject an idea just because it’s untraditional.
“The fact that we’re doing something new and creative, and it incentivizes lawyers to take cases, and it helps our colleagues at the Bar, I think is a good thing.”