Can a lawyer charge a fee to a doctor or health-care provider who is paid out of the client's settlement, when the provider never agreed to it?

Plain-English summary

The Committee considered whether an attorney may, as a routine practice, pay a physician or other health-care provider for medical services rendered to the client out of the proceeds of a settlement with an insurer or third party, and then deduct a collection fee or other charge against the provider, where the provider was not put on notice of the attorney's expectations and did not explicitly or tacitly approve. It answered "No."

The opinion relied on the KBA/KMA and LBA/JCMA Interprofessional Codes, which make clear that bills for such medical services are the responsibility of the client, though the attorney should seek to protect the provider's interest as a matter of professional courtesy. Those Codes suggest the attorney request authorization from the client to make such payments at the time of employment, or at least at the time of disbursement. The opinion concluded that neither Code suggests an attorney may automatically charge an additional attorney fee to the provider for forwarding such payments. It added that nothing in the opinion is intended to affect the substantive law of subrogation, and noted the opinion was referred to and approved by the Physician/Attorney Liaison Committee.

Currency note

This opinion was issued in 1988 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 Treat this page as historical context, not current guidance.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 lawyer deduct a collection fee from a provider when paying medical bills from a settlement?

A: Not without the provider's agreement. The opinion concluded a lawyer may not automatically charge an additional fee to a provider for forwarding payment when the provider was not on notice and did not approve.

Q: Whose responsibility are the client's medical bills?

A: The client's. The opinion relied on the Interprofessional Codes, which make medical bills the client's responsibility, with the attorney seeking to protect the provider's interest as professional courtesy.

Q: What should the lawyer do about paying providers from a settlement?

A: The opinion said the Interprofessional Codes suggest the attorney request the client's authorization to make such payments at the time of employment, or at least at the time of disbursement.

Background and rules framework

The opinion addresses fee propriety and the handling of settlement funds under the former Code, drawing on the KBA/KMA and LBA/JCMA Interprofessional Codes rather than a single Disciplinary Rule. The modern analogs are Model Rule 1.5 (fees) and Model Rule 1.15 (safekeeping property, including funds in which third parties claim an interest). The analysis turns on the absence of the provider's notice or consent to an added charge.

Citations and references

Rules of Professional Conduct:

• DR 2-106 (former Code; fees)
• MR 1.5 (fees); MR 1.15 (safekeeping property)

Other opinions cited:

• KBA/KMA and LBA/JCMA Interprofessional Codes; Michigan Ops. C-226 (1982), CI-846 (1982), CI-928 (1983)

See also

• ABA Formal Op. 93-379: Billing for Fees and Expenses

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-327.pdf

Original opinion text

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

KENTUCKY BAR ASSOCIATION
Ethics Opinion KBA E-327
Issued: January 1988

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:

May an attorney charge a fee to a physician or health care provider who is paid out
of the proceeds of a client's settlement with an insurer or third party if the physician
or health care provider was not put on notice of the attorney's expectations and did
not explicitly or tacitly approve of the attorney's "working on its behalf"?

Answer:

No.

References:

KBA/KMA and LBA/JCMA Interprofessional Codes; Michigan Ops. C-226(1982);
CI-846(1982); and CI-928(1983).

OPINION
A question that has arisen from time to time is whether an attorney can, as a routine
practice, pay a physician or other health care provider for medical services rendered to the
attorney's client, out of the proceeds of a settlement with an insurer or other third party, and deduct
a collection fee or other charge against the physician or other health care provider.
The KBA/KMA and LBA/JCMA Interprofessional Codes both make it clear that bills for
such medical services are the responsibility of the client, although the attorney should seek to
protect the interest of the physician or health care provider as a matter of professional courtesy.
The Codes suggest that the attorney request authorization from the client to make such payments at
the time of employment, or at least at the time of disbursement. Neither Code suggests that an
attorney may automatically charge an additional attorney fee to the physician or health care
provider for forwarding such payments.
Nothing in this opinion is intended to affect the substantive law of subrogation.
This opinion was referred and approved by the Physician/ Attorney Liaison Committee.

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.