Can a lawyer collect a client's auto med-pay insurance proceeds, hold them in trust, and negotiate down the medical provider's bill before paying it?

Plain-English summary

The Committee considered whether an attorney may obtain a client's medical-payment ("med-pay") coverage monies paid under an automobile liability insurance policy, hold the money in trust until the end of the case, and then attempt to negotiate a reduction in the medical care provider's fee. The Committee answered yes, and noted that where this is within the scope of the representation the lawyer likely has an obligation to do so. The opinion expressly limited itself to the ethical question and did not opine on the commercial relationship between the provider and the lawyer; it noted that if the client properly assigned benefits to the provider, the provider can refuse the lawyer's request for the funds.

The opinion describes the common pattern: an injured client visits a provider and assigns insurance benefits, but once a lawyer is retained the lawyer asks that the med-pay monies be paid to the lawyer and held in trust until the representation concludes, then negotiates the provider's fee. The Committee identified the protective purpose for the client: many clients are unsophisticated and unaware they have med-pay coverage; allowing the first provider to deplete the coverage can leave the client unable to cover later expenses and more dependent on the opposing insurer, which is motivated to pay as little as possible. Using the client's own med-pay coverage to satisfy expenses puts the client in a better position to obtain sufficient compensation.

The opinion grounds the duty in the competence requirement of NRPC 1.1. Citing In re Discipline of Joe M. Laub (Nev. 2002), where the Nevada Supreme Court disciplined a lawyer who told a client he would try to reduce the client's medical bills but neither he nor his staff made any such effort, the Committee noted the Court's statement that an attorney has a duty to negotiate for the client to the best of his ability, whether with the opposing side, the opposing insurer, or the client's own medical providers. The Committee concluded the Nevada rules do not prohibit the practice and that it is strongly arguable that, when obtaining med-pay monies is part of the representation, the lawyer has an obligation to secure the funds, hold them in trust, and attempt to negotiate a reduction. In a footnote, the opinion flags but does not resolve whether an attorney may charge a contingent fee for recovering med-pay coverage, noting NRPC 1.5(a) bars an unreasonable fee and that authorities split (Maryland's Kemp adopted a near per se rule against such contingent fees, while West Virginia's Morton required only that the fee be reasonable); the Committee did not opine on whether any particular contingent fee is reasonable.

In practice

The opinion holds that, under the Nevada rules as they stood at the time, a lawyer may collect a client's med-pay coverage, hold it in the client trust account, and negotiate down the medical provider's bill before paying, and that competence under NRPC 1.1 likely requires the attempt when securing those monies is within the representation. The opinion does not decide whether a contingent fee for recovering med-pay coverage is reasonable, which it treats as a fact-specific inquiry under NRPC 1.5(a).

Common questions

Q: Can a lawyer take a client's med-pay insurance money and hold it before paying the doctor?

A: Per the opinion, yes; the lawyer may obtain the med-pay coverage, hold it in trust until the end of the case, and negotiate the provider's fee before paying, subject to any valid assignment of benefits the provider may enforce.

Q: Is the lawyer required to try to reduce the client's medical bills?

A: The opinion concluded it is strongly arguable that competence under NRPC 1.1 obligates the lawyer to attempt to negotiate a reduction when obtaining med-pay monies is within the scope of the representation, citing In re Discipline of Laub.

Q: Can the lawyer charge a contingent fee for recovering med-pay coverage?

A: The opinion did not decide this. It noted NRPC 1.5(a) bars an unreasonable fee and that authorities split on contingent fees for med-pay recovery, and declined to opine on whether any particular fee is reasonable.

Background and rules framework

The opinion interprets the competence requirement of NRPC 1.1, the safekeeping-of-property rule NRPC 1.15 (holding client and third-party funds in trust), and the reasonableness-of-fees rule NRPC 1.5(a), in the context of personal-injury representation involving automobile med-pay coverage.

Citations and references

Rules of Professional Conduct:

• Model Rule 1.1 / Nev. RPC 1.1 (competence)
• Model Rule 1.15 / Nev. RPC 1.15 (safekeeping property)
• Model Rule 1.5 / Nev. RPC 1.5(a) (reasonableness of fees)

Cases:

• In re Discipline of Laub, Order of Suspension, Case No. 36322 (Nev. Jan. 9, 2002), failing to attempt to reduce a client's medical bills as a lack of competence
• Atty. Grievance Comm'n v. Kemp, 496 A.2d 672 (Md. Ct. App. 1985), contingent fee for med-pay recovery
• Lawyer Disciplinary Bd. v. Morton, 569 S.E.2d 412 (W. Va. Ct. App. 2002), reasonableness of a med-pay contingent fee

See also

• NV Ethics Op. 53: an attorney-owned medical-lien business
• Alabama Ethics Op. 2015-01: medical-lien reduction and double-dipping

Source

• Landing page: https://nvbar.org/for-lawyers/ethics-discipline/ethics-opinions/
• Original PDF: https://nvbar.org/wp-content/uploads/Opinion%2042.pdf