Can a lawyer hire an independent non-lawyer adjuster to negotiate and settle a client's accident claim, and pay that adjuster a percentage of the settlement?

Plain-English summary

The inquiry asked whether an attorney representing a plaintiff in an automobile accident case could hire an independent, non-attorney adjuster to negotiate and settle the plaintiff's case with the defendant's insurance carrier, and if so, whether the attorney could pay the lay adjuster a fixed percentage of the settlement as a fee.

The Committee applied several canons: Canon 33 (no partnerships with non-professionals where part of the work is the practice of law), Canon 34 (no division of legal fees with a layman), Canon 35 (a lawyer should avoid performing professional services through lay intermediaries), and Canon 47 (no lawyer may let his services or name aid the unauthorized practice of law by a lay agency).

The Committee concluded that engaging a layman to settle a claim offended Canons 33 and 35, and that to the extent it enabled the adjuster to perform legal services it constituted aiding the unlawful practice of law contrary to Canon 47. Because the threshold conduct was improper, the percentage-fee question was governed by Canon 34's bar on dividing legal fees with a layman.

Currency note

This opinion was issued in October 1964, before New Jersey's September 13, 1971 adoption of the Disciplinary Rules (Code of Professional Responsibility), and well before the 1984 Rules of Professional Conduct and all later revisions. It applied Canons 33, 34, 35, and 47 of the former Canons of Professional Ethics; the corresponding subjects are now governed by RPC 5.4 (professional independence and fee sharing), RPC 5.5 (unauthorized practice of law), and RPC 5.3 (responsibilities regarding nonlawyer assistants). Treat this page as historical context, not current guidance.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: Could the lawyer hire a non-lawyer adjuster to negotiate and settle the client's accident claim?

A: No. The Committee held that engaging a layman to settle a claim offended Canons 33 and 35, and aided the unlawful practice of law under Canon 47 to the extent it let the adjuster perform legal services.

Q: What about paying the adjuster a percentage of the settlement?

A: The Committee noted Canon 34's prohibition on dividing legal fees with a layman. Because the underlying arrangement was already improper, the percentage payment was not permissible.

Q: Why was settling a claim treated as legal work?

A: The Committee treated negotiating and settling the plaintiff's claim as a professional legal service, so delegating it to a lay adjuster ran into the canons against lay intermediaries and aiding unauthorized practice.

Background and rules framework

The opinion applied four canons of the former Canons of Professional Ethics: Canon 33 (partnerships involving the practice of law with non-professionals), Canon 34 (division of legal fees with a layman), Canon 35 (use of lay intermediaries), and Canon 47 (aiding the unauthorized practice of law). These subjects are now addressed by RPC 5.4, RPC 5.5, and RPC 5.3.

Citations and references

Rules of Professional Conduct (as in effect at the time):

• Canon of Professional Ethics 33 (partnerships with non-professionals)
• Canon of Professional Ethics 34 (division of fees with a layman)
• Canon of Professional Ethics 35 (intermediaries)
• Canon of Professional Ethics 47 (aiding unauthorized practice)

See also

• NJ ACPE Op. 66: Representing a Collection Agency
• NJ ACPE Op. 61: Unauthorized Practice in Title Closings
• NJ ACPE Op. 160: Unauthorized Practice, Representing the Other Party

Source

• Landing page: https://law.justia.com/cases/new-jersey/advisory-committee-on-professional-ethics/2004/acp56-1.html

Original opinion text

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

87 N.J.L.J. 700
October 29, 1964

OPINION 56

Services of Professional Adjustor
Intermediaries Aiding Unlawful Practice

This inquiry poses the questions:

Is it proper for an attorney who represents a plaintiff in an automobile accident case to hire an independent, non-attorney, adjustor to negotiate and come to a settlement of the plaintiff's case with the defendant's insurance carrier?

If the answer to the foregoing inquiry is in the affirmative, is it proper for the attorney to pay the lay adjustor a fixed percentage of the settlement as his fee?

The last paragraph of Canons of Professional Ethics, Canon 33 provides:

Partnerships between lawyers and members of other professions or non-professional persons should not be formed or permitted where any part of the partnership employment consists of the practice of law.

Canon 34 prohibits division of legal fees with a layman; Canon 35 directs the attorney to avoid performing professional legal services through lay intermediaries; and Canon 47 provides:

No lawyer shall permit his professional services, or his name, to be used in aid of, or to make possible, the unauthorized practice of law by any lay agency, personal or corporate.

The engagement of a layman to settle a claim offends Canons 33 and 35; and, to the extent it enables the adjustor to perform legal services, it constitutes aiding the unlawful practice contrary to Canon 47.