Insurance companies doing business in Massachusetts must notify consumers when settlement checks of $5,000 or more have been sent to their lawyers, according to a recent directive by the state insurance commissioner intended to reduce attorney fraud.
The new rule is meant to safeguard against lawyers stealing settlement money from clients, often after resolving legal claims without their knowledge or forging clients' signatures on settlement checks. The measure had been supported by several of the state's largest bar associations, which contend that while thieving lawyers make up only a small percentage of the profession, the damage they do to its reputation is significant.
"It is critically important that consumers be made aware of the fact that a settlement check has been put in the mail and that their claim has been resolved," Insurance Commissioner Nonnie S. Burnes said in a statement. "These new guidelines will go a long way toward giving consumers the greater protections they deserve and will help increase their overall confidence in the integrity of the claims process."
The measure, which went into effect last month, was proposed several years ago by the state Clients' Security Board, which reimburses people who have been defrauded by lawyers. It received new impetus following the 2006 indictment of Anthony R. Bott, an Orleans lawyer who robbed a dozen clients of $450,000 by settling insurance claims without their knowledge and keeping the money. Bott was sentenced to 2 1/2 years in jail and ordered to pay restitution after pleading guilty.
In her statement, Burnes cited the Bott case.
Opponents of the new rule said it unfairly creates the impression that many lawyers are dishonest, and that it allows insurance companies to interfere with lawyer-client relationships. But some former critics of the measure said they were mollified by language in the new rule that directs consumers to contact their attorneys if they have additional questions.
"We're certainly in favor of people not being cheated; we were only opposed to anything that leads to the perception that you can't trust your lawyer," said Stephen A. Lechter, an executive board member of the Bristol County Bar Association, which had fought the proposal.
Under the new rule, once an insurance settlement has been paid, insurers are required to mail a letter to the consumer that includes information about the amount of the check, and the party and address to whom the check was mailed. If the payment was made electronically, the letter must include the amount, date, and recipient of the electronic transfer.
The state Division of Insurance issued the new directive as a "bulletin," which is not mandatory and carries no penalties if insurance companies decline to follow it. But a spokeswoman for the division, Kimberly Haberlin, noting that Connecticut and Rhode Island already have laws requiring similar notifications, said, "We fully expect that insurers will comply, given the fact that they are complying with statutes that were initiated by legislatures in neighboring states."
Sacha Pfeiffer can be reached at pfeiffer@globe.com.
