Most of organized lawyerdom, as we know, strongly opposes any notion of capping damages recoverable by victims, even as applied to “non-economic” damages claimed for intangible harms such as pain and suffering or emotional distress. It turns out, however, that the bar enthusiastically supports the capping in nearly every state of one particular form of compensation, namely, the compensation of clients who are embezzled from or otherwise defrauded by their lawyers. In Pennsylvania, for example, the official Pennsylvania Lawyer Fund for Client Security (more) caps damages payable to defrauded clients at $75,000, although the loss actually sustained by the victimized client often runs far higher than that. Columnist Don Spatz of the Reading, Pa. Eagle notices the irony: “Even if you can prove your lawyer stole $200,000 from you, you’re out of luck. There’s a cap. … I haven’t heard lawyers worry about caps taking away those victims’ rights.” (“First, lawyer, heal thyself”, Reading Eagle, Mar. 24, at HALT site).

It should be noted that the damages clients attempt to recover after being defrauded by their lawyers are typically direct out-of-pocket economic losses, as opposed to money for humiliation, psychic distress and the like. Yet lawyers in most states have secured payout caps even lower than Pennsylvania’s $75,000, often much lower: Illinois lawyers cap their collective responsibility at a paltry $10,000 per case, for example, and Nevada’s at $15,000. (2002 ABA Center for Professional Responsibility survey of state plans, reprinted at Michigan Bar Association site, PDF, scroll to Chart II, part 2). Perhaps these lawyers are worried that setting caps at a more generous level (or, heaven forfend, removing them entirely) would increase the premiums currently assessed against them to cover the risk pools. In Pennsylvania, according to columnist Spatz, these premiums were recently running at the very extravagant level of $45 per lawyer per year.

In a number of states, it should be noted, lawyers impose an effective cap of zero on this particular kind of claim, by the simple method of not having established any collective client protection scheme at all. And there is a certain very plausible logic to that position: why after all should rank and file attorneys be asked to clean up the messes left by their errant brethren? Is a lawyer his brother’s keeper? It’s just that this argument would sit better were the leaders of the bar not constantly denouncing the medical profession for its alleged failure to police itself.

More: David Giacalone, with whom we agree on so many other issues, strongly disagrees with this post (May 20). He thinks I should have made it clearer that the client protection funds with their caps kick in only as a sort of consolation prize when clients are unable to recoup losses by direct suit against an embezzling or otherwise misbehaving lawyer, and that such direct suits are not subject to damage limitations. He also believes I should have been more charitable in acknowledging that it was gracious of the legal profession to have consented to the establishment of such funds at all. And he thinks no one should be expected to sign a “blank check” for 100 percent compensation of the profession’s client/victims: “The funds have limitations on how much each client can be reimbursed, because there is a finite amount of money in each fund, and it would be unfair to have clients with the largest losses (often those with the largest estates or investments) receive payments that empty the fund, leaving nothing for other victims.” I suspect that logic may strike a responsive chord among some other groups in society that get asked to pick up compensation bills of uncertain potential magnitude.

I observed that most state plans are even stingier than Pennsylvania’s, which limits client recoveries to $75,000 and assesses lawyers $45 a year. He prefers to talk about New York’s plan, which is abnormally generous. Fine, but when he agrees with HALT (which preceded me in reprinting columnist Spatz’s Reading Eagle piece) that “client protection funds need to be better funded in many states”, isn’t he simply making much the same point as mine in a different way?

Nor is it the case that doctors escape paying for their errant brethren while lawyers cheerfully volunteer to do so. In Pennsylvania and other states, assigned-risk and joint underwriting agreement schemes redistribute the cost of liability insurance for “high-risk” doctors (such as those in the most-sued specialties) to buyers of medical liability insurance in general, or to wider categories of insurance buyer. Since medical liability policies commonly now run into the tens of thousands of dollars annually per doctor, it seems more than likely that many doctors who never face suit themselves are paying “brother’s keeper” premiums far exceeding $45 a year, the proceeds of which go to pay for the (uncapped) liability awards that their brethren incur. In fact, isn’t it typical for organized lawyerdom to back the creation of assigned-risk schemes applicable to doctors, drivers and other defendants, since such schemes expand the availability of deep pockets in case of injury? If so, it is more than a fair question to ask why they themselves should manage to dodge the application of this principle of collective risk-spreading.

Filed under: deep pocket, emotional distress, ethics, Illinois, Michigan, Pennsylvania