May a Connecticut plaintiff's lawyer personally indemnify a settling defendant against Medicare or other liens on the client's recovery?

Plain-English summary

Personal-injury insurers sometimes asked plaintiffs' counsel to hold defendants harmless against claims arising from Medicare, state, or valid private liens on settlement funds. The Committee concluded that counsel could not enter the described indemnification agreements.

Under Rule 1.7(b), the lawyer's contingent exposure to lien payments creates a personal-interest conflict. The financial risk could influence the lawyer to recommend rejecting a settlement that otherwise serves the client's interests. The same exposure conflicts with Rule 2.1's requirement of independent professional judgment and candid advice.

The agreement also violates Rule 1.8(e). Although the lawyer assumes contingent liability rather than making an immediate payment, guaranteeing the client's obligations gives the client a financial benefit connected with pending litigation. The rule's exceptions for court costs and litigation expenses do not cover third-party liens.

The Rules do not prevent the defendant from requiring the plaintiff to confirm that no liens exist or from requiring the plaintiff personally to hold the defendant harmless. The opinion also leaves unchanged counsel's separate Rule 1.15 duties concerning third-party interests in settlement funds.

In practice

Under this opinion, the prohibited feature is counsel's personal financial guaranty of the client's third-party obligations. A condition directed to the plaintiff, or an affidavit about liens, does not create the same lawyer-funded exposure described in the opinion.

Common questions

Q: May counsel personally indemnify the defendant against Medicare or other liens?

A: No. The Committee finds violations of Rules 1.7(b), 1.8(e), and 2.1.

Q: Why does the agreement create a conflict?

A: Counsel's potential liability could affect settlement advice, including whether to recommend an offer that creates substantial lien exposure for the lawyer.

Q: Is a contingent guaranty financial assistance under Rule 1.8(e)?

A: Yes. The Committee says the rule does not distinguish direct from indirect assistance, and guaranteeing the client's debts gives the client a financial benefit.

Q: May the defendant require the plaintiff to address the liens?

A: Yes. The opinion says the defendant may require a plaintiff affidavit concerning liens or condition settlement on the plaintiff's own hold-harmless agreement.

Q: Does the opinion change counsel's Rule 1.15 duties?

A: No. It expressly preserves prior opinions concerning counsel's independent duties when a third party asserts an interest in settlement funds.

Background and rules framework

Rule 1.7(b) addresses a significant risk that a lawyer's personal interest or duty to a third person will materially limit the representation. Rule 2.1 requires independent professional judgment and candid advice. Rule 1.8(e) generally prohibits financial assistance connected with pending or contemplated litigation, subject to stated litigation-cost exceptions.

Citations and references

Connecticut Rules of Professional Conduct:

• Rules 1.7(b), 1.8(e), 1.15, and 2.1

Other opinions cited:

• Arizona Formal Ethics Opinion 03-05 (2003)
• Florida Ethics Opinion 70-8 (1993)
• Illinois State Bar Association Advisory Opinion 06-01 (2006)
• Indiana Ethics Opinion 2005-01 (2005)
• Kansas Legal Ethics Opinion 01-05 (2001)
• Missouri Formal Opinion 125 (2008)
• New York State Bar Association Ethics Opinion 852 (2011)
• North Carolina Ethics Opinion RPC 228 (1996)
• South Carolina Bar Ethics Opinion 2008-07 (2008)
• Tennessee Formal Ethics Opinion 2010-F-154 (2010)
• Vermont Advisory Ethics Opinion 96-05
• Wisconsin Formal Opinion E-87-11 (1996)
• Connecticut Informal Opinions 95-20, 99-06, 2001-08, 2010-01, and 2010-05, third-party interests in settlement funds

See also

• NY State Bar Op. 852: Indemnifying a client in settlement
• Georgia Ethics Op. 13-2: Lawyer settlement indemnity
• Maine Ethics Op. 204: Attorney hold-harmless agreement

Source

• Landing page: Connecticut Bar Association Informal Ethics Opinions
• Original PDF: Informal Opinion 12-06