Lawyers back legislation to deter insurance claim thefts by dishonest peers

March 05, 1998|By Kate Shatzkin | Kate Shatzkin,SUN STAFF

Lawyers who police their profession and compensate the victims of unscrupulous peers urged a Senate committee yesterday to pass a notification bill they said would deter attorney thefts from settlements with insurance companies.

Senate Bill 476, sponsored by Sen. Delores G. Kelley, would require insurance companies to inform clients when they have made a payment of more than $2,000 to the client's attorney in settlement of a claim. Seven states have such a requirement. The first to pass such a law, New York, has seen thefts of such settlements decline by 90 percent.

A representative of the insurance industry objected to the bill, saying it would cause problems in the attorney-client relationship while doing little about the overall problem of lawyers stealing. But another supported the measure.

Isaac Hecht, treasurer and a trustee of Maryland's Clients' Security Trust Fund, which compensates victims of lawyers, told the Senate Finance Committee that 24 percent of more than $800,000 in claims the fund has paid since July 1 resulted from thefts of settlements that, in many cases, clients never knew had been made.

Pointing to what he called an "unethical fee arrangement that these bums enter into," Hecht said a small number of lawyers persuade their clients to allow them to sign settlement releases and checks on the client's behalf without the client's knowledge. That can allow a lawyer to settle a case and take the money.

"We're looking for anything that will help to deter attorney theft," said Melvin Hirshman, chief bar counsel for Maryland's Attorney Grievance Commission, which polices unethical lawyers.

The General Assembly passed a notification bill several years ago, but made it voluntary after insurance companies said they would send letters to clients. Since then, Hecht said, he knew of none that had.

Kelley, a Baltimore County Democrat, said of her notification bill: "We just think that you shall know the truth, and the truth shall set you free."

Leo W. Doyle, a lobbyist for the National Association of Independent Insurers, said the bill would create "administration problems" for insurers and raise questions about the appropriateness of contacting the client of an opposing attorney. As a lawyer, Doyle said, he felt the measure would unfairly tarnish the profession, implying that all attorneys cannot be trusted when few steal.

"A lot of people who are operating in good faith are going to be inconvenienced and burdened by this," Doyle said.

But the bill drew support from the Maryland State Bar Association. Said association lobbyist Buzz Winchester: "I wish this bill wasn't necessary, but unfortunately it is."

Marta Harting, a lobbyist for State Farm Insurance Co. in Maryland, said the company had estimated it would cost $40,000 a year to send notifications to the people it paid. "If people are going to get the money they are entitled to, we think it's money well spent," she said.

Pub Date: 3/05/98

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