Must a seller's lawyer who is a member of a bar-related title insurer get the buyer's consent before placing the title insurance with that insurer?

Plain-English summary

An attorney represented the seller in a real estate transaction and was also a shareholder-member and authorized signatory of Attorneys' Title Guaranty Fund, Inc. He intended to use that company to satisfy the seller's contractual obligation to provide title insurance, and the seller had been told of the relationship and had consented. The purchaser argued that, as the party primarily relying on the title insurance and the named insured, his consent was also required, and that absent it the seller's attorney had a conflict of interest.

The committee recalled its Opinion 227 (1963), which adopted ABA Formal Opinion 304 recognizing the propriety of bar-related title insurance companies while requiring an attorney who obtains title insurance from an affiliated company, and who may earn a commission, to disclose that financial interest to his client and obtain the client's consent. The rationale was the conflict inherent in representing a client while standing to profit from the client's purchase of insurance from the attorney's affiliated company.

The committee declined to extend that requirement to the purchaser, a non-client. It reasoned that the purchaser's foreseeable reliance on the insurance and his status as named insured did not create an attorney-client relationship imposing a direct duty on the seller's attorney, and that Rule 5-101(a), which addresses the duty owed to a client when the attorney's interests may affect the representation, therefore did not apply, nor did any other Code provision impose the suggested duty to a non-client. The committee added that whether title insurance is equivalent to merchantable title is a matter for the real estate contract, not ethics: the purchaser was free to negotiate a voice in selecting the insurer, but this contract placed the title-insurance obligation solely on the seller. So the seller's attorney owed the disclosure-and-consent duty only to the seller.

Currency note

This opinion was issued in 1983, under the former Illinois Code of Professional Responsibility and before Illinois adopted the 2010 Rules of Professional Conduct. The ISBA Board of Governors affirmed the opinion in July 2010 as generally consistent with the 2010 Rules (Rules 1.7 and 1.8), while cautioning that the specific standards referenced may differ from the 2010 Rules. 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 or requirement mentioned here.

Common questions

Q: Does the buyer have to consent when the seller's lawyer co-owns the title insurer?

A: The opinion concluded no; the attorney's disclosure-and-consent obligation runs to his client, the seller, and the buyer's foreseeable reliance and named-insured status do not make the buyer a client owed that duty.

Q: Who must the seller's attorney disclose his interest to?

A: Per the opinion, the attorney must disclose his financial interest in the affiliated title company to, and obtain the consent of, his own client (the seller), following Opinion 227 and ABA Formal Opinion 304.

Q: How can a buyer protect against the seller's lawyer's interest?

A: The committee said this is a matter for the real estate contract, not ethics: the purchaser is free to negotiate to obtain the insurance himself or to have a voice in selecting the title insurer, but this contract placed that obligation on the seller alone.

Background and rules framework

The opinion applied former Illinois Code Rule 5-101(a) (the duty owed a client when the attorney's financial or personal interests may affect the representation), and relied on Opinion 227 and ABA Formal Opinion 304 on bar-related title insurance. The Board's 2010 affirmation maps the analysis to current Illinois Rules of Professional Conduct 1.7 (concurrent conflicts) and 1.8 (a lawyer's business and financial interests in dealings touching the client), corresponding to ABA Model Rules 1.7 and 1.8.

Citations and references

Rules of Professional Conduct:

• Illinois Code Rule 5-101(a) (applied in the opinion)
• Illinois RPC 1.7, 1.8 (2010 equivalents per the Board's affirmation)
• MR 1.7 (concurrent conflicts); MR 1.8 (a lawyer's interests in transactions affecting the client)

Other opinions cited:

• ISBA Opinion 227 (1963): adopting ABA Formal Opinion 304; an attorney using an affiliated title company must disclose the interest to and obtain consent from the client
• ABA Formal Opinion 304: ethical propriety of bar-related title insurance companies

See also

• ISBA Ethics Op. 84-14: Lawyer Acting as Real Estate Broker
• ISBA Ethics Op. 870: Representing a Client's Competitor
• ISBA Ethics Op. 802: Lawyer as Surety on a Client's Bond

Source

• Landing page: https://www.isba.org/ethics/opinions/841