Can a lawyer accept a flat fee per case from an insurance company to handle all of its insurance defense work?

Plain-English summary

A Florida Bar member asked whether it was proper to accept a set fee per case from an insurance company to defend all of the insurer's third-party insurance defense work. The inquiring attorney was concerned that her own interest in keeping defense costs low could affect the representation of the insured, citing American Insurance v. Kentucky Bar Association, in which a court found that a set fee interfered with the attorney's independent professional judgment and created an interest in the outcome conflicting with duties to the client.

The committee concluded that nothing in the Rules Regulating The Florida Bar specifically prohibited a flat fee arrangement and that a conflict-of-interest argument did not bar representation on a flat fee basis. Surveying other states (Connecticut, Ohio, Oregon, New Hampshire), the committee observed that a flat fee was not prohibited so long as the attorney's obligations to the insured were not limited, including disclosure of the fee arrangement, competence and diligence, prompt communication, and confidentiality. Quoting Ohio Ethics Opinion 97-7, the committee agreed that the fee had to be reasonable and adequate, not so inadequate that it compromised the lawyer's duties as a competent and zealous advocate, and that litigation expenses on top of the flat fee had to be borne by the insurer.

The opinion concluded that a set fee arrangement for third-party defense was not per se prohibited. The inquirer, regardless of the fee arrangement, still owed the insured all duties under the Rules of Professional Conduct, including full disclosure of the set fee arrangement. She could not enter into a set fee so low as to impair her independent professional judgment or cause her to limit the representation, and if she felt the arrangement affected her judgment or created a conflict because of her own interest in reducing costs, she was free to decline it.

Currency note

This opinion was issued in 1998, before The Florida Bar's adoption of the 2006 revisions to the Rules of Professional Conduct. Subsequent rule amendments or later opinions may have changed the analysis. Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific rule, deadline, or requirement mentioned here.

Common questions

Q: Did the opinion allow a flat fee per case for all of an insurer's defense work?

A: Yes. The committee concluded that a set fee per case for third-party defense was not per se prohibited and that a conflict-of-interest argument did not, by itself, bar the arrangement.

Q: What limit did the opinion place on the size of the fee?

A: The opinion concluded the lawyer could not accept a fee so low that it impaired her independent professional judgment or caused her to limit the representation; quoting Ohio Opinion 97-7, the fee had to be reasonable and adequate, and litigation expenses had to be borne by the insurer.

Q: What did the lawyer owe the insured despite the insurer paying a flat fee?

A: Per the opinion, the lawyer owed the insured all duties under the Rules of Professional Conduct, including full disclosure of the set fee arrangement, competence, diligence, prompt communication, and confidentiality.

Background and rules framework

The opinion interpreted the Florida fee and conflict rules as they stood in 1998: Rule 4-1.5 (fees, Model Rule 1.5), Rule 4-1.7(b) (conflict where the lawyer's own interest may materially limit the representation, Model Rule 1.7), Rule 4-1.8(f)(2) (compensation from a third party without interference with the lawyer's independent professional judgment, Model Rule 1.8(f)), and Rule 4-1.1 (competence, Model Rule 1.1).

Citations and references

Rules of Professional Conduct:

• Model Rule 1.1 / Fla. Rule 4-1.1 (competence)
• Model Rule 1.5 / Fla. Rule 4-1.5 (fees)
• Model Rule 1.7 / Fla. Rule 4-1.7(b) (own-interest conflict)
• Model Rule 1.8(f) / Fla. Rule 4-1.8(f)(2) (third-party compensation)

Cases:

• American Insurance v. Kentucky Bar Association, 917 S.W.2d 568 (Ky. 1996), set fee and independent professional judgment

Other opinions cited:

• Connecticut Op. 97-20; Kentucky Op. E-368; Ohio Op. 97-7; Oregon Op. 1991-98; New Hampshire Op. 1990-91/5

See also

• FL Bar Ethics Op. 97-1: Insurer Instructions and Summary Judgment
• FL Bar Ethics Op. 98-3: In-House Insurance Counsel and Firm Names
• FL Bar Ethics Op. 02-7: Insured Client's Rights

Source

• Landing page: https://www.floridabar.org/etopinions/etopinion-98-2/
• Original PDF: https://www-media.floridabar.org/uploads/2017/04/FL-Bar-Ethics-Op-98-2.pdf

Original opinion text

Reproduced from the official source for research purposes. The linked source is authoritative.

FLORIDA BAR ETHICS OPINION
OPINION 98-2
June 18, 1998
Advisory ethics opinions are not binding.
An attorney may accept a set fee per case from an insurance company to defend all of the
insurer’s third party insurance defense work unless the attorney concludes that her independent
professional judgment will be affected by the arrangement.
RPC: 4-1.1, 4-1.5, 4-1.7(b), 4-1.8(f)(2)
Opinions: Connecticut Ethics Opinion 97-20; Kentucky Ethics Opinion E-368; Ohio Ethics
Opinion 97-3; Oregon Ethics Opinion 1991-98; New Hampshire Ethics Opinion
1990-91/5
Case: American Insurance v. Kentucky Bar Association, 917 S.W.2d 568 (Ky. 1996)
A member of The Florida Bar has written to inquire whether it is proper to accept a set
fee per case from an insurance company to defend all of the insurer’s third party insurance
defense work. The inquiring attorney is concerned that such a fee arrangement is impermissible
because the inquirer’s own interest in keeping costs of the defense low would affect the
representation of the insured or that the fee arrangement might otherwise affect the independent
professional judgment of the inquirer. The inquirer cites to the case of American Insurance v.
Kentucky Bar Association, 917 S.W.2d 568 (Ky. 1996), in which the court stated “the pressures
exerted by the insurer through the set fee interferes with the exercise of the attorney’s
independent professional judgment, in contravention of Rule 1.8(f)(2). The set fee arrangement
also clashes with Rule 1.7(b) in that it creates a situation whereby the attorney has an interest in
the outcome of the action which conflicts with the duties owed to the client: quite simply, in
easy cases, counsel will take a financial windfall; in difficult cases, counsel will take a financial
loss.” Id. at 572.
Nothing in the Rules Regulating the Florida Bar specifically prohibits a flat fee
arrangement. The Committee concludes that a conflict of interest argument does not bar
representation on a flat fee basis.
Other states which have examined this question have responded that a flat fee
arrangement is not prohibited, in light of the fact that the attorney’s obligations to the client are
not limited. Connecticut Informal Opinion 97-20; Ohio Ethics Opinion 97-7; Oregon Ethics
Opinion 1991-98; New Hampshire Ethics Opinion 1990-91/5. Such obligations include
disclosure to the insured of the fee arrangement between the insurer and the attorney,
competence and diligence in the representation of the insured, prompt communication about the
progress of the representation, and confidentiality of information regarding the representation.
However, such compensation does implicate rules regarding conflicts of interest. Recognizing
that a flat fee could be so inadequate as to affect an attorney’s independent professional
judgment, the Ohio Ethics Opinion 97-7 concluded the following:
an attorney or law firm may enter into a contract with a liability insurer in which
the attorney or law firm agrees to do all or a portion of the insurer’s defense work
for a fixed flat fee. However, the fee agreement must provide reasonable and
adequate compensation; it must not be excessive or so inadequate that it
compromises the attorney’s professional obligations as a competent and zealous
advocate. The fee agreement must not adversely affect the attorney’s independent
professional judgment; the attorney’s representation must be competent, zealous,
and diligent; and the expenses of litigation, in addition to the flat fee, must
ultimately be borne by the insurer.
We agree. We therefore conclude that a set fee arrangement for third party defense is not
per se prohibited. The inquirer, regardless of her fee arrangement, owes her client, the insured,
all attendant obligations and responsibilities under the Rules of Professional Conduct. These
obligations include full disclosure to the client, the insured, of the set fee arrangement between
the attorney and the insurer. The inquirer may not enter into a set fee agreement in which the set
fee is so low as to impair her independent professional judgment or cause her to limit the
representation of the insured. Additionally, if the inquirer feels that her independent professional
judgment is affected by the fee arrangement or that she has a conflict with her client because of
her own interest in reducing the costs of defense, the inquirer is free to decline to enter into such
an arrangement.