Can a North Carolina lawyer sign an ERISA health plan agreement promising not to abandon or settle the client's claim without the plan's approval?

Plain-English summary

The opinion addresses a lawyer representing an injured worker whose denied workers' compensation claim overlaps with a self-funded ERISA health benefits plan. As a precondition to paying the client's medical expenses, the plan asks the client and the lawyer to sign an agreement under which the client (the "promisor") agrees to fully prosecute his claim and not to abandon or settle it without the plan's written approval; the agreement states the promises bind both the client and his attorney and requires the lawyer's signature.

The committee concludes the lawyer may not agree to terms that contradict his professional responsibility under Rule 1.2. Rule 1.2 requires the lawyer to abide by the client's decisions concerning the objectives of the representation and the client's decision whether to settle. A promise to the plan not to abandon or settle without the plan's approval would conflict with that duty: if the client later decides to abandon or settle without the plan's approval, the lawyer must follow the client's directive. The lawyer therefore may not agree to conditions that usurp the client's authority over the objectives of the representation.

In practice

Under the North Carolina rules as they stood at the time of the opinion, a lawyer may not sign the plan's agreement insofar as it binds the lawyer not to abandon or settle the client's claim without the plan's approval. The opinion grounds this in Rule 1.2: the client, not the plan, holds the authority to decide the objectives of the representation and whether to settle, and the lawyer must follow the client's directives even if the client had agreed to the plan's conditions.

The opinion addresses only the lawyer's professional responsibilities under Rule 1.2; it speaks to the terms a lawyer may agree to, not to the client's own contractual obligations to the plan.

Common questions

Q: Can a North Carolina lawyer sign an ERISA plan agreement promising not to settle the client's claim without the plan's approval?

A: No. The opinion concludes the lawyer may not agree to terms that contradict his Rule 1.2 duty to abide by the client's decisions about the objectives of the representation and whether to settle.

Q: Why is the settlement-approval condition a problem for the lawyer?

A: Per the opinion, Rule 1.2 obligates the lawyer to follow the client's decision whether to settle. If the client decides to settle without the plan's approval, the lawyer must follow that directive, so the lawyer cannot promise the plan otherwise.

Q: Does the opinion decide the client's own obligations to the plan?

A: No. The opinion addresses the lawyer's professional responsibilities under Rule 1.2 and the conditions the lawyer may agree to, not the client's separate contractual relationship with the plan.

Background and rules framework

The opinion interprets Rule 1.2 (Model Rule 1.2, scope of representation and allocation of authority). Rule 1.2 reserves to the client the authority to decide the objectives of the representation and whether to settle a matter, while the lawyer decides the means. The committee applies that allocation to a third-party agreement (here, the client's ERISA plan under 29 U.S.C.A. § 1001 et seq.) that would require the lawyer to obtain the plan's approval before abandoning or settling the claim, concluding the lawyer may not assume an obligation that displaces the client's decision-making authority.

Citations and references

Rules of Professional Conduct:

• Model Rule 1.2 / NC Rule 1.2(a) (client's authority over the objectives of representation and whether to settle)

Statutes:

• Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C.A. § 1001 et seq.

See also

• ABA Formal Op. 01-421: Lawyer Acting Under Insurance Company Guidelines

Source

• Landing page: https://www.ncbar.gov/for-lawyers/ethics-and-governing-rules/ethics-opinions/opinions/2019-formal-ethics-opinion-2/

Original opinion text

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

Lawyer represents an injured worker in a denied workers’ compensation claim. Client participated in a self-funded health benefits plan (Plan) though his workplace. The Plan was established under the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C.A. § 1001 et seq. As a precondition to issuing payments for Client’s medical expenses, the Plan requested that Client and Lawyer sign an Agreement that includes the provisions described below.

The Agreement between the Plan and Lawyer’s client (referred to as “the promisor”) sets out that the promisor was injured on the job; that the promisor is currently proceeding or promises to initiate a claim against his employer; that the promisor’s claim is disputed; and that the promisor is in need of benefits under the Plan.

The Agreement states that, as a condition of receiving Plan benefits, the promisor agrees to fully prosecute his pending claim and agrees not to abandon or settle his claim without the written approval of the Plan. The Agreement states that the promises made in the Agreement are binding upon the promisor and the promisor’s attorney and requires the signature of the promisor’s attorney.

Inquiry:

Do the Rules of Professional Conduct permit Lawyer to agree not to abandon or settle the Client’s claim without the approval of the Plan?

Opinion:

No. Lawyer may not agree to any terms in the Agreement that contradict Lawyer’s professional responsibility to abide by Client’s directives regarding the representation as set out in Rule 1.2.

The Agreement requires Client and his counsel to fully prosecute the pending workers’ compensation claim and to obtain written approval from the Plan before abandoning or settling the claim. As to Lawyer, these requirements conflict with Lawyer’s professional responsibilities to Client as set out in Rule 1.2. Pursuant to Rule 1.2, Lawyer has an ethical obligation to “abide by a client’s decisions concerning the objectives of representation” and “abide by a client’s decision whether to settle a matter.” If Client signs the Agreement and subsequently decides to abandon or settle the matter without the Plan’s approval, Lawyer has a professional obligation to follow Client’s directives. Lawyer may not agree to the conditions in the Agreement that usurp Client’s authority as to the objectives of the representation.