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Panel offers client protection proposals

Legislation aimed at preventing large-scale attorney defalcation has been recommended by a Virginia State Bar task force.

The payee notification bill approved in April by the VSB Payee Notification Task Force would have insurance companies notify personal injury claimants when settlement checks are being mailed to their lawyers.

The idea gained force after a Woodbridge lawyer stole nearly $4 million by pocketing settlement money without telling his clients, but insurance companies are opposed.

The VSB legislation would apply to payments based on settlements or judgments of $5,000 or more. The proposed bill limits its application to attorneys licensed in Virginia.

Wording of the notice – sent by email or snail mail – would be strictly prescribed. The message would advise claimants to contact their attorneys with any questions. Insurance companies would be barred from any other communication with a represented claimant regarding settlement of a claim without lawyers’ consent.

The task force also recommends expanding the safety net for clients by boosting payment limits under the VSB Clients Protection Fund. The panel suggests raising the loss reimbursement limit per client from $50,000 to at least $100,000 and raising the per-attorney payout limit from 10 percent to at least 15 percent of the fund’s net worth.

By Peter Vieth

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