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§ 3-201. Permissible business organizations; name restrictions; membership professional liability; insurance required; dissolution.

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   (A) As of December 1, 1999, attorneys who are licensed to practice law in Nebraska may do so in the form of professional corporations, limited liability companies, or limited liability partnerships (herein referred to as “domestic professional organizations”) permitted by the laws of Nebraska to conduct the practice of law, provided that such professional organizations maintain the mandatory minimum levels of professional liability insurance set forth at § 3-201(C)(7) and are established and operated in accordance with the provisions of this rule and the Nebraska Rules of Professional Conduct, and provided that a certificate of authority is granted by the Nebraska Supreme Court pursuant to § 3-202(A). For purposes of these rules, "organizing document" shall mean articles of incorporation, articles of organization, certificate of organization, statement of qualification, or parternship agreement for domestic professional organizations.

   (B) As of December 1, 1999, attorneys may practice law in Nebraska in forms similar to domestic professional organizations formed pursuant to the laws of a jurisdiction other than Nebraska (herein referred to as “foreign professional organizations”), and the laws of such other jurisdiction shall govern (i) the organization, (ii) internal affairs, and (iii) all its other corporate aspects, provided that such foreign professional organization is operated in accordance with the applicable provisions of this rule, including the mandatory minimum professional liability insurance requirement and liability provisions of § 3‑201(C)(7). Whether or not such provisions are set forth in the organizational documents of a foreign professional organization, they are applicable and binding by operation of this rule.

   (C) The provisions of this rule shall apply to all foreign and domestic professional organizations (hereinafter collectively referred to as “professional organizations”) having as shareholders, officers, directors, partners, employees, members, or managers one or more attorneys who engage in the practice of law in Nebraska, whether such professional organizations are formed under Nebraska law or under laws of another state or jurisdiction. All professional organizations conducting the practice of law in Nebraska shall comply with the following requirements, and the organizing document of any domestic professional organization shall contain provisions complying with the following requirements:

   (1) The name of the professional organization organized under this rule shall contain the words “professional corporation,” “limited liability company,” or “limited liability partnership,” or abbreviations thereof such as “P.C.,” “L.L.C.,” or “L.L.P.” In addition, any professional corporation organized under this rule shall have as a part of its firm name the words “A Limited Liability Organization,” or an abbreviation thereof such as "L.L.O.," following its designation as a professional corporation or P.C. The name of the professional organization shall meet the ethical standards established for the names of law firms according to the standards of professional conduct promulgated by the Supreme Court and the Nebraska Rules of Professional Conduct;

   (2) All members of the professional organization who engage in the practice of law within the State of Nebraska shall be persons duly licensed by the Nebraska Supreme Court to practice law in the State of Nebraska, and at all times own their own interest in their own right, and all members of the professional organization who engage in the practice of law outside this state shall be persons duly licensed by the states, territories, or other jurisdictions in which such persons engage in the practice of law, and at all times own their own interest in their own right;

   (3) Provisions shall be made requiring any member who ceases to be eligible to be a member to dispose of all of his or her interest in the professional organization forthwith, either to the professional organization or to a person having the qualifications described in § 3-201(C)(2);

   (4) The management of the professional organization shall have the qualifications of the persons described in § 3-201(C)(2);

   (5) The professional organization shall be organized solely for the purpose of conducting the practice of law, and only through persons qualified to practice law in the State of Nebraska if such persons engage in the practice of law within this state, or through persons qualified to practice law in the states, territories, or other jurisdictions in which such persons engage in the practice of law;

   (6) No professional organization may engage in the practice of law except by and through the person or persons of its licensed member or members or licensed professional employees, all of whom shall retain their professional licenses in good standing and shall be subject to all rules, regulations, standards, and requirements pertaining to their professional activities. The provisions of this rule shall not be construed to abolish, repeal, modify, restrict, or limit the standards for professional conduct or the law now in effect applicable to the professional relationship and liabilities between the person furnishing the professional services and the person receiving such professional services;

   (7)(a) A member or professional employee of a professional organization shall remain personally and fully liable and accountable for any negligent or wrongful acts or misconduct committed by him or her, or by any person under his or her direct supervision and control, while rendering professional services on behalf of the professional organization to the person for whom the professional services were being rendered.

   (b) All professional organizations operating under this rule shall maintain professional liability insurance as set forth herein. The organizing document shall provide that any shareholder, partner, or member who has not directly and actively participated in the act, error, or omission for which liability is claimed shall not be liable, except as provided in § 3-201(C)(7)(b)(v), for any of the damages caused if at the time the act, error, or omission occurs the professional organization has professional liability insurance which meets the following minimum standards:

   (i) The insurance shall insure the professional organization against liability imposed upon it arising out of the practice of law by attorneys employed by the professional organization in their capacities as attorneys.

   (ii) Such insurance shall insure the professional organization against liability imposed upon it by law for damages arising out of the professional acts, errors, and omissions of all nonprofessional employees.

   (iii) The policy may contain reasonable provisions with respect to policy periods, territory, claims, conditions, exclusions, and other matters.

   (iv) The insurance shall be in an amount for each claim of at least $250,000 multiplied by the number of attorneys employed by the professional organization, and if the policy provides for an aggregate top limit of liability per year for all claims, the limit shall not be less than $500,000 multiplied by the number of attorneys employed by the professional organization; provided, however, that no professional organization shall be required to carry total limits of insurance in excess of $1,000,000 for each claim or be required to carry an aggregate top limit of liability for all claims per year of more than $5,000,000.

   (v) The policy may provide for a deductible or self-insured retained amount and may provide for the payment of defense or other costs out of the stated limits of the policy. In either or both such events, the liability assumed by the shareholders, partners, or members of the professional organization shall include the amount of such deductible or retained self-insurance and shall include the amount, if any, by which the payment of defense costs may reduce the insurance remaining available for the payment of claims below the minimum limits of insurance required by this rule if the ultimate liability for the claim exceeds the amount of insurance remaining to pay for it.

   (vi) A professional act, error, or omission is considered to be covered by professional liability insurance for the purpose of this rule if the policy includes such act, error, or omission as a covered activity, regardless of whether claims previously made against the policy have exhausted the aggregate top limit for the applicable time period or whether the individual claimed amount or ultimate liability exceeds either the per claim or aggregate top limit.

   (c) The organizing document shall also provide, and each shareholder, partner, or member shall be deemed to agree, that if it is determined that the mandatory professional liability insurance as set forth above has lapsed or is otherwise not in effect at the time of the commission of any professional act, error, or omission by any of the shareholders, officers, directors, partners, members, managers, or employees of the professional organization, each of the shareholders, partners, or members of the professional organization at the time of the commission of any such professional act, error, or omission shall be jointly and severally liable to the extent that the assets of the organization are insufficient to satisfy any liability incurred by the corporation for the acts, errors, and omissions of the shareholder, partner, or member and other employees of the organization while they are shareholders, partners, or members, to the same extent as if the shareholder, partner, or member were practicing in the form of a general partnership.

   (8) Except as provided by § 3-201(C)(7), the relevant states’ rules of liability applicable to the particular foreign professional organization shall apply to limited liability organizations organized hereunder.

   (9) The liability assumed by the shareholders, partners, or members of the professional organization pursuant to § 3-201(C)(7) is limited to liability for professional acts, errors, or omissions which constitute the practice of law and shall not extend to actions or undertakings that do not constitute the practice of law. Liability, if any, for any and all actions or undertakings, other than professional acts, errors, or omissions, shall be as generally provided by law and shall not be changed, affected, limited, or extended by this rule.

   (10) A professional organization that discontinues the practice of law may nevertheless continue in operation for an additional period of up to 2 years for the purpose of dissolving and winding up the administrative business of the professional organization.

Rule IC(1) amended January 12, 2000; Rule IA and IC(1) amended July 13, 2005, effective September 1, 2005. Renumbered and codified as § 3‑201, effective July 18, 2008; §§ 3-201(A), (C), and (C)(7)(b)-(c) amended December 22, 2010.

 

This page was last modified on Monday, September 24, 2012