Can a lawyer recommend title insurance and act as title agent in the same real estate deal, and split insurance commissions with other attorneys who steer clients to him?

Plain-English summary

The Committee answered two questions. On the first, it concluded that a lawyer may recommend title insurance and act as a title examiner and agent for the title insurance company in a real estate or loan transaction. The opinion conditioned that on full disclosure: all persons involved (purchaser or seller, borrower or lender, and the title insurance company) should be fully apprised of any multiple representation or potential for conflicts of interest, and of the fact that the lawyer will receive a fee or commission for writing the title policy. The individual clients must consent to the multiple representation. The opinion added that while it is proper to charge both a legal fee for a title search and a premium charge after consent following full disclosure, the lawyer should credit the client's account for the portion of the premium that compensates for legal or title work already billed, to avoid double payment for the same work.

On the second question, the Committee answered "No." It reasoned that nominating other attorneys as "authorized title examiners" and splitting insurance commissions with them when they recommend purchasing title insurance through the lawyer would encourage prohibited solicitation under DR 2-103(B) and (C), which bar a lawyer from compensating a person or organization for recommending the lawyer's employment or requesting recommendations of employment. The opinion concluded that splitting commissions as a further inducement to mutual referral solidified that conclusion.

Currency note

This opinion was issued in 1984 under Kentucky's former Code of Professional Responsibility (in effect 1971 to 1990), before the Kentucky Bar Association's 1990 adoption of the Rules of Professional Conduct (SCR 3.130) and the substantial 2009 revisions to those rules. Subsequent rule amendments or later opinions may have changed the analysis. Treat this page as historical context, not current guidance. Verify against the current rules before relying on any specific rule, deadline, or requirement mentioned here.

Common questions

Q: Can a Kentucky lawyer act as both the attorney and the title insurance agent in a closing?

A: Under this opinion, qualified yes. The Committee concluded the lawyer may serve as title examiner and agent so long as everyone involved is fully told of the multiple representation, the potential conflicts, and the lawyer's fee or commission, and the clients consent.

Q: Can the lawyer charge both a legal fee for the title search and a title insurance premium?

A: The opinion said yes after consent and full disclosure, but the lawyer should credit the client for the part of the premium that represents legal or title work already billed, to avoid a double charge for the same work.

Q: Can the lawyer pay or share commissions with other attorneys who refer title insurance business to him?

A: No. The opinion concluded that naming "authorized title examiners" and splitting commissions for their referrals would encourage prohibited solicitation under DR 2-103(B) and (C).

Background and rules framework

The opinion applied the former Code's conflict provisions, DR 5-101(A) (a lawyer's own financial interest), DR 5-105 (multiple clients), and DR 5-107 (third-party influence), together with the anti-solicitation provisions DR 2-103(B) and (C). The modern analogs are Model Rule 1.7 (concurrent conflicts), Model Rule 1.8(a) and (f) (a lawyer's business dealings and third-party compensation), and Model Rule 7.2(b) (a lawyer generally may not give anything of value for a recommendation). The analysis turned on disclosure and consent for the dual role, and on the bar against paying for referrals.

Citations and references

Rules of Professional Conduct:

• DR 5-101(A); DR 5-105; DR 5-107; DR 2-103(B); DR 2-103(C) (former Code)
• MR 1.7 (conflicts of interest); MR 1.8 (business transactions and third-party compensation); MR 7.2(b) (payment for recommendations)

Other opinions cited:

• ABA Op. 331 (1972); S.C. Op. 82-20; Tenn. Op. 80-F-2 (1980); N.H. Op. 3 (1981); Conn. Op. 34 (1982); Maine Ops. 18 (1981) and 40 (1983); compare N.C. Op. 302 (1981) and N.J. Op. 495 (1982) (disclosure may not cure a conflict where the lawyer owns a beneficial interest)

See also

• KBA Ethics Op. E-337: Title Company Profit Sharing for Channeled Work
• FL Bar Ethics Op. 66-11: Claim Against a Lawyer's Title Fund

Source

• Landing page: https://kybar.org/For-Members/Rules-Ethics-Information/Ethics-Opinions
• Original PDF: https://kybar.org/Portals/0/Admin/Ethics%20Opinions/KBA_E-295.pdf

Original opinion text

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

KENTUCKY BAR ASSOCIATION
Ethics Opinion KBA E-295
Issued: September 1984

This opinion was decided under the Code of Professional Responsibility, which was in
effect from 1971 to 1990. Lawyers should consult the current version of the Rules of
Professional Conduct and Comments, SCR 3.130 (available at http://www.kybar.org),
before relying on this opinion.

Question 1:

May an attorney recommend title insurance and act as title examiner and agent for
the title insurance company in a real estate transaction or a loan transaction?

Answer 1:

Qualified yes.

Question 2:

May the attorney nominate other attorneys as "authorized title examiners" and split
insurance commissions with them if they recommend that title insurance be
purchased through him?

Answer 2:

No.

References:

DR 5-101(A); DR 5-105(A)(B)(C); DR 5-107(A)(1)(2); ABA Op. 331(1972); S.C.
Op. 82-20 (n.d.); Tenn. Op. 80-F02(1980); N.H. Op. 3(1981); Comm. Op.
34(1982); Maine Ops. 18(1981) and 40(1983); DR 2-103(B)(C).
OPINION

A lawyer may recommend title insurance and act as a title examiner and agent for the title
insurance company in a real estate transaction or a loan transaction. All persons involved,
including the purchaser or seller, borrower or lender, as well as the title insurance company, should
be fully apprised of any multiple representation or the potential for conflicts of interest resulting
therefrom, and of the fact that the lawyer will receive a fee or commission for writing the title
policy. The individual clients must consent to any multiple representation. DR 5-101(A); DR
5-105(A) (B)(C); DR 5-107(A)(1)(2); ABA Op. 331 (Maru doc. 7326, 1972); S.C. Op. 82-20
(n.d.); Tenn. Op. 80-F-2(1980); N.H. Op. 3(1981); Conn. Op.34 (1982). But compare N.C. Op.
302 (1981) and N.J. Op. 495 (1982) (not even disclosure will cure the potential or actual conflict if
the lawyer owns a beneficial interest in the title company or property involved).

On the other hand, while it is proper to charge the client both a legal fee for a title search
and a premium charge, if consent has been obtained after full disclosure made prior to the
undertaking of the employment, the lawyer should credit the client's account for that portion of
the premium that represents compensation for legal work/title work already billed. This is
necessary to avoid a double payment for the same work. Maine Ops. 18 (1981) and 40 (1983).

With regard to Question 2, we must make reference to DR 2-103(B) (C) which provide
that:
(B)
A lawyer shall not compensate or give anything of value to a person or
organization to recommend or secure his employment by a client, or as a regard for
having made a recommendation resulting in his employment by a client.
(C)
A lawyer shall not request a person or organization to recommend employment,
of himself, his partner, or associate.…
The committee believes that the attorney/agent's proposed course of conduct would
encourage prohibited solicitation (of legal/title or by the naming of "authorized (attorney) title
examiners" in return for their efforts to encourage the purchase of the agent's product. The splitting
of insurance commissions as a further inducement to this mutual referral further solidifies this
view.

Note to Reader
This ethics opinion has been formally adopted by the Board of Governors of the Kentucky
Bar Association under the provisions of Kentucky Supreme Court Rule 3.530 (or its predecessor
rule). The Rule provides that formal opinions are advisory only.