Representing your client -- and other people
You're handling a personal injury case, and your client has signed a "protection letter" with the doctor, pretty much a standard practice: the client gets medical treatment without having to pay for it at the time, with the promise that the doctor will be paid out of the proceeds of any settlement or judgment. That happy day comes, and you bring your client in to sign the settlement sheet and okay the distribution of the proceeds. When you get to the part about sending a check to the doctor, your client tells you that he doesn't want you to do that: he'll take care of the doctor out of his own money.
There were more than a few lawyers who'd do that, in the understandable belief that their client is the one who calls the shots, and if the client says he wants all the money (except for fees and expenses), it's the lawyer's obligation to give him just that. That you're no longer working for just your client was one change in the new Rules of Professional Conduct that went into effect this past February, and that point was emphasized by an Opinion of the Board of Commissioners on Grievances and Discipline a couple weeks ago. (You can read the Opinion here.)
Rule 9-102 of the old Code of Professional Responsibility governed your duties with regard to client funds, and the duty was purely binary: there was you, and there was your client. Rule 1.15(d) of the new Rules of Professional Conduct changes that:
Upon receiving funds or other property in which a client or third person has an interest, a lawyer shall promptly notify the client or third person. Except as stated in this rule or otherwise permitted by law or by agreement with the client or a third person, confirmed in writing, a lawyer shall promptly deliver to the client or third person any funds or other property that the client or third person is entitled to receive. Upon request by the client or third person, the lawyer shall promptly render a full accounting regarding such funds or other property.
As the opinion spells out, that means in the scenario I presented above, you have to tell your client, "I can't do that." Failing to give the third party the proceeds he's entitled to is a disciplinary violation.
I've got mixed feelings about this. On the one hand, just because we represent clients doesn't mean we're whores for them; I have ethical and moral problems with assisting the client in breaching his contractual obligations. If I know that the client has promised his doctor that he'll get paid out of the proceeds of a settlement, then I think I have an obligation to honor that agreement, even if the client doesn't want to.
On the other hand, we're not just talking about doctors here; I find I'm suddenly working for the insurance companies, if they've got a subrogation provision in their insurance contract. What's more worrisome is that the burden seems to have shifted to me to determine that question: as the Opinion notes,
Not every claim of a third person triggers a lawyer's safekeeping duty, only a lawful claim that a lawyer knows of is an interest subject to protection under Rule 1.15. '[K]nows' denotes actual knowledge of the fact in question. A person's knowledge may be inferred from circumstances."
That's my emphasis, and that's where things get hairy: does my knowledge that health insurance contracts normally have subrogation provisions allow it to be "inferred" that my client's particular contract does? Do I have a duty to find that out?
Keep in mind that more than just a disciplinary violation might result: you could be on the hook for the money. As the Opinion notes, back in 1996 the 11th District held that a lawyer who distributed funds to the client in violation of the letter of protection the client had signed with the doctor was personally liable to the doctor for the funds.
I suppose I shouldn't be surprised to learn that my professional duties now include making sure that insurance companies get their money. The new disciplinary rules are based on the ABA model rules, and there's been criticism over the years that the ABA is too deferential to the insurance industry, a not-surprising accusation given that much of its membership consists of the insurance defense bar. This may simply be another example of the Golden Rule: them with the gold, makes the rules.