New Supreme Court rules effective February 1, 2000 permit Kentucky Lawyers to engage in limited liability forms of law practice - registered limited liability partnerships, limited liability companies, and professional service corporations. Under the new rules an attorney remains personally liable and accountable to clients for the attorney's own acts, errors, and omissions, and those of any attorney directly supervised.
The rules require attorneys practicing in limited liability forms of practice to maintain "adequate" insurance or maintain other acceptable forms of adequate financial coverage for errors and omissions. Adequate insurance is defined as $50,000 per claim multiplied by the number of lawyers in the entity, with an aggregate maximum limit of liability per policy year for all claims of at least $100,000 multiplied by the number of attorneys in the entity. The rule goes on to set a minimum limit of $250,000 per claim and minimum aggregate for all claims of $500,000 per policy year for limited liability forms of practice.
The foregoing is only a thumbnail sketch of the new rules. SCR 3.022 Forms of Practice of Law and SCR 3.024 Requirements of Practicing Law in Limited Liability Entities are in the January 2000 Bench & Bar and are an absolute must read. They are the biggest change in lawyer liability in Kentucky ever. Vicarious liability for the negligence of those you practice with, but do not supervise, now may be avoided with a limited liability form of practice and the right insurance program. Your house no longer need be put at risk by the negligence of other lawyers in the firm over whom you have no supervision.
Now is the time to review your business entity form of practice and professional liability insurance program (or lack thereof) to determine what you need to do to get in compliance with the new rules. If your firm is not a limited liability entity, this is a good time to review your situation. The January 2000 Bench & Bar article, Kentucky Supreme Court Approves The Practice Of Law In Limited Liability Entities, by Sieffert, Dolson, and Rutledge is a big help in making this review. In looking at your professional liability insurance program remember that we do insurance programs at Lawyers Mutual - give us a call.