If a client signs a letter of protection promising a medical provider payment from a settlement, can the lawyer pay the client all the proceeds anyway?

Plain-English summary

A medical provider treating a personal-injury plaintiff may ask the plaintiff's lawyer for a letter of protection guaranteeing that the provider's bill will be paid from any settlement or judgment proceeds. The Board addresses whether a lawyer may follow a client's later instruction to pay all the proceeds to the client when the client agreed to pay the provider through a letter of protection.

The opinion explains that, with the client's consent, a lawyer may prepare such a letter, and the lawyer should advise the client that signing it creates a legal agreement with the provider. The lawyer should make clear in the letter that the lawyer is not promising to pay from personal funds and will hold any disputed funds in trust. (The opinion notes in a footnote that, separately, a lawyer may not directly pay or advance funds for a client's medical treatment because that is not a legitimate litigation expense, citing Stark Cty. Bar Assn. v. Williams.) Under Prof.Cond.R. 1.15(d), funds in which a third person has a "lawful interest," which the rule defines to include a written agreement by the client or the lawyer guaranteeing payment from specific funds, must be promptly delivered to the person "entitled to receive" them. Because the client's letter of protection gives the provider a lawful interest, the opinion concludes the lawyer may decline a client's instruction to pay the entire proceeds to the client, citing Disciplinary Counsel v. Joltin, where a lawyer was disciplined for failing to pay a provider under a letter of protection.

On handling disputes, the opinion explains the lawyer must place the proceeds in trust and notify everyone with a lawful interest (Prof.Cond.R. 1.15(d)). If the client objects to paying the provider, the lawyer should tell the provider and tell the client that the provider has been notified. Once a dispute arises among persons with a lawful interest, the lawyer must hold the funds until the dispute is resolved (Prof.Cond.R. 1.15(e)) and may not unilaterally resolve it (Rule 1.15, cmt. [4]). The Board notes the lawyer may remind the client of the obligation to the provider, may negotiate a reduction on the client's behalf, and should promptly distribute any undisputed portion to the client. This opinion withdraws Adv. Op. 1995-12.

In practice

Under this opinion, an Ohio lawyer who has issued a letter of protection at the client's direction treats the medical provider as a person with a lawful interest in the settlement proceeds under Prof.Cond.R. 1.15(d). The opinion concludes the lawyer may decline the client's later instruction to pay everything to the client, because the provider is "entitled to receive" its share.

The opinion sets out the dispute mechanics: hold the proceeds in trust, notify all interested persons, and if a dispute arises, keep the disputed funds in trust until it is resolved rather than deciding it unilaterally, while promptly releasing any undisputed portion to the client.

Common questions

Q: Can an Ohio lawyer pay a client all the settlement money despite a signed letter of protection?

A: No. The opinion concludes that because the letter of protection gives the medical provider a lawful interest in part of the proceeds under Prof.Cond.R. 1.15(d), the lawyer may decline the client's instruction to disburse everything to the client.

Q: Is a lawyer personally on the hook for the provider's bill under a letter of protection?

A: The opinion advises the lawyer to make clear in the letter that the lawyer is not promising to pay from personal funds; it notes letters of protection can raise surety questions that are matters of law outside the opinion's scope.

Q: What does the lawyer do if the client disputes paying the provider?

A: Per the opinion, the lawyer must hold the disputed funds in trust until the dispute is resolved (Prof.Cond.R. 1.15(e)), notify the provider and the client, and not unilaterally resolve the dispute; any undisputed portion should be promptly paid to the client.

Q: Can the lawyer try to reduce the provider's bill?

A: Yes. The opinion states the lawyer may negotiate on the client's behalf for a reduction in the amount owed to the provider.

Background and rules framework

The opinion interprets Ohio Prof.Cond.R. 1.15 (Model Rule 1.15; safekeeping property), specifically 1.15(d) (delivering funds a third person is entitled to receive and the definition of "lawful interest") and 1.15(e) (holding disputed property until the dispute is resolved). It also notes Prof.Cond.R. 1.8 limits on advancing funds for a client's medical treatment.

Citations and references

Rules of Professional Conduct:

• Model Rule 1.15 / Ohio Prof.Cond.R. 1.15(d), 1.15(e) (safekeeping property; delivering funds; holding disputed funds)
• Model Rule 1.8 / Ohio Prof.Cond.R. 1.8(e) (financial assistance to a client)

Cases:

• Disciplinary Counsel v. Joltin, 147 Ohio St.3d 490, 2016-Ohio-8168, discipline for failing to pay a provider under a letter of protection
• Stark Cty. Bar Assn. v. Williams, 137 Ohio St.3d 112, 2013-Ohio-4006, lawyer may not advance funds for a client's medical treatment
• Solon Family Physicians, Inc. v. Buckles, 96 Ohio App.3d 460 (1994), letter of protection sufficient to create a surety relationship (compare Ohio State Univ. Hosps. v. Evans)

Other opinions cited:

• CT Eth. Op. 01-05 (2001); TX Eth. Op. 625 (2013); Ohio Adv. Op. 2007-07: handling of funds in which a third party has an interest

See also

• Ohio BPC Op. 2025-02: Mortgage on Client Property to Secure a Legal Fee
• Ohio BPC Op. 2023-12: Charging Lien Based on the Highest Settlement Offer

Source

• Landing page: https://ohioadvop.org/advisory-opinion-index/
• Original PDF: https://www.ohioadvop.org/wp-content/uploads/2023/10/Adv.-Op.-2023-10-Final.pdf

Original opinion text

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

OPINION 2023-10
Issued October 6, 2023
Withdraws Adv. Op. 1995-12

Lawyer's Obligation When Letter of Protection Issued to Medical Services Provider

SYLLABUS: A lawyer, with a client's consent, may prepare a letter of protection that guarantees that proceeds from a future settlement or judgment will be withheld to pay a medical services provider. A lawyer may decline to follow a client's instruction not to pay medical care providers from proceeds obtained by settlement or award when the client entered into a written agreement to pay the provider from the proceeds through a letter of protection. A lawyer must hold disputed funds involving two or more persons with a lawful interest in the funds in a lawyer's trust account until the dispute is resolved.

APPLICABLE RULES: Prof.Cond.R. 1.8, 1.15

QUESTION PRESENTED: Whether a lawyer may follow a client's instructions to pay all proceeds from a settlement or judgment to the client when the client agreed to pay a medical services provider out of the proceeds through a letter of protection.

ANALYSIS: A medical provider providing services to personal injury plaintiff may request a letter of protection from the patient's lawyer guaranteeing that the expenses for the client's medical care will be paid from any proceeds. The lawyer, with a client's consent, may draft the letter of protection to a medical service provider in anticipation of payment from funds to be received by the lawyer for the client through the resolution or adjudication of the client's personal injury claim. The letter is typically signed by the lawyer and medical provider. Letters of protection can raise various legal issues for lawyers. See e.g., Solon Family Physicians, Inc. v. Buckles (1994), 96 Ohio App. 3d. 460 (holding that a "letter from attorneys to doctor providing medical services on accident victim's behalf was sufficient to give rise to a surety relationship and made attorneys liable for accident victim's medical bill."); but see Ohio State Univ. Hosps v. Evans, 5th Dist. Licking Case No. 95 CA 00019, 1995 Ohio App. LEXIS 4682, (Sept. 21, 1995)(language in letter of protection did not create a surety.) Any legal issues that may be raised by the question presented are outside the scope of this advisory opinion.

Letter of Protection

A lawyer should advise the client of the consequences of a letter of protection, specifically that the client, acting through the lawyer, has entered into a legal agreement with the provider. A letter of protection guaranteeing to withhold payment from a client's settlement or award proceeds is permissible and distinct from a guarantee by the lawyer that all medical expenses as to that provider will be paid out of any settlement or judgment proceeds. The lawyer should indicate in the letter to the provider that the lawyer is not promising to pay the provider from his or her own personal funds and that the lawyer will hold any disputed funds in a lawyer's trust account in the event a dispute about payment to the provider arises. Some providers may require that the client and lawyer sign an agreement prepared by the provider that should be carefully reviewed by the lawyer and possibly modified to protect the client's interests.

Prof.Cond.R. 1.15(d) classifies the funds held by a lawyer in which a third person has a "lawful interest" as a "statutory lien, a final judgment, or a written agreement by the client or the lawyer on behalf of the client guaranteeing payment from the specific funds * * * *." Id. (emphasis added). A lawyer is required to "promptly deliver any funds or other property that the client or third person is entitled to receive." Prof.Cond.R. 1.15(d). The key language in the rule is the phrase "entitled to receive." See e.g., Disciplinary Counsel v. Joltin, 147 Ohio St.3d 490, 2016-Ohio-8168 (lawyer disciplined for failing to distribute proceeds due to provider through a letter of protection.) Due to the client's written agreement with the provider through the letter of protection issued by the lawyer, the provider has a "lawful interest" in a portion of the settlement or award proceeds. Prof.Cond.R. 1.15(d). The disbursement of all the proceeds to the client at the client's direction, when the provider retains a lawful interest, is contrary to the rule's requirement to promptly deliver funds that the client or a third party is "entitled to receive." The lawyer may decline to follow a client's instruction to disburse all the proceeds to the client when a third person, in this instance a medical provider, has a lawful interest in part of the proceeds through the issuance of a written letter of protection.

Lawyer Handling of Disputed Funds

When a lawyer receives the proceeds from settlement or a judgment, the lawyer must place the funds in lawyer's trust account and notify all persons with a lawful interest of the receipt of the proceeds. Prof.Cond.R. 1.15(d). Absent a client's objection to disburse funds which are due by agreement, a lawyer has an obligation to disburse the funds to the recipient of the letter of protection. CT Eth. Op. 01-05 (2001). If the client instructs the lawyer that the funds are not to be transferred to the medical services provider, the lawyer should advise the provider and simultaneously advise the client that the provider has been notified. Once a dispute over funds has arisen between two or more persons with a lawful interest, a lawyer is required to hold the funds until the dispute is resolved. Prof.Cond.R. 1.15(e); Adv. Op. 2007-07; see TX Eth. Op. 625 (2013). Also, a lawyer should not "unilaterally assume to resolve the dispute between the client and third person." Prof.Cond.R. 1.15, cmt.[4]. To do otherwise would place the lawyer in a position to determine disbursement that may not be in accord with a future legal ruling. The Board recommends that the lawyer remind the client of the client's legal obligations to the medical services provider to promote resolution of the issue. The lawyer may also negotiate on the client's behalf for a reduction in the amount owed to the provider. Any portion of the proceeds not the subject of the dispute should be promptly distributed to the client. Prof.Cond.R. 1.15(e).