Can a lawyer take a contingent percentage of the client's own medical-payments (med-pay) insurance when the insurer hasn't disputed coverage?

Plain-English summary

The committee addressed the practice of treating payments under the "medical payments" provision of a client's own insurance policy as part of the amount "recovered" for purposes of a contingent-fee contract that pays the lawyer a percentage of "amounts recovered." The inquiry assumed that, because the insurer had not denied coverage, little or no lawyer effort would be needed to obtain the med-pay. Because of the limited and fact-sensitive nature of the question, the committee responded in the form of an informal opinion, subject to the Board of Governors' approval for promulgation.

The committee applied Rule 1.5(a), which requires that a lawyer's fee be reasonable and lists factors including the time, labor, novelty, and skill required and whether the fee is fixed or contingent. It reasoned that the contingent nature of a fee is only one factor in reasonableness, so a contingent percentage appropriate against a recovery from a third party (or its carrier) would probably be excessive and exorbitant, and therefore unreasonable, when applied to medical payments made without dispute by the client's own carrier.

The committee declined to adopt a universal prohibition, because disputes can arise over the amounts payable as well as coverage, which could require the lawyer's services. It concluded that such fee arrangements must be scrutinized on the applicable facts and circumstances, and that the fact a contingent-fee contract specifically provides for including such payments in the percentage is irrelevant to whether the resulting fee is in fact reasonable.

Currency note

This opinion was issued in 1992 under the Oklahoma Rules of Professional Conduct (effective July 1, 1988), before the later Ethics 2000-based amendments to those Rules. The fee-reasonableness standard (compare Model Rule 1.5 and the Oklahoma equivalent) may have changed in detail. Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific rule, deadline, or requirement mentioned here.

Common questions

Q: Can a lawyer keep a contingent percentage of the client's own med-pay benefits?

A: Often not. The committee concluded that applying a third-party-recovery percentage to undisputed med-pay from the client's own carrier would probably be excessive and unreasonable under Rule 1.5(a).

Q: Is it always prohibited?

A: No. The committee declined a blanket rule, because disputes over coverage or amount can require the lawyer's work; the arrangement is judged on the facts.

Q: Does a contract clause expressly including med-pay settle the issue?

A: No. The committee concluded such a clause is irrelevant to whether the resulting fee is actually reasonable.

Background and rules framework

The opinion interpreted Rule 1.5(a) of the Oklahoma Rules of Professional Conduct (a lawyer's fee must be reasonable, applying the rule's enumerated factors), which corresponds to Model Rule 1.5.

Citations and references

Rules of Professional Conduct:

• Oklahoma RPC 1.5(a) / Model Rule 1.5(a): a lawyer's fee must be reasonable, judged by the listed factors including whether the fee is fixed or contingent.

See also

• Okla. Bar Ethics Op. 286: Charging interest on past-due fees and expenses
• Okla. Bar Ethics Op. 299: Contingent fees in divorce cases are void as against public policy
• ABA Formal Op. 94-389: Contingent fees

Source

• Landing page: https://www.okbar.org/ethics/ethics-opinion-no-306/

Original opinion text

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

Adopted December 18, 1992

INQUIRY

Is it per se unreasonable for an attorney to take as a fee a percentage of the client’s own med-pay when the insurance company has not denied coverage?

OPINION

Further inquiry has developed that the issue involved is a practice of treating payments made under the “medical payments” provision of a client’s own insurance policy as included within the amount “recovered” for the purposes of contingent fee contracts providing for the lawyer to receive a certain percentage of “amounts recovered.” The inquiry apparently assumes that since “the insurance company has not denied coverage,” little or no effort on the part of the lawyer would be required to obtain payment of the amount in question.

Because of the limited scope and fact sensitive nature of the issue presented, the Legal Ethics and Unauthorized Practice of Law Committee has elected to respond in the form of an Informal Opinion, subject, however, to its approval for promulgation by the Board of Governors.

Rule 1.5(a) of the Oklahoma Rules of Professional Conduct mandates that “a lawyers fee shall be reasonable,” and specifies certain factors to be considered in making such a determination, e.g., “(1) the time and labor required, the novelty and difficulty of the questions involved, and the skill requisite to perform the legal service properly;” and “(8) whether the fee is fixed or contingent.” The “contingent” nature of the fee is only one element in determining “reasonableness.” Therefore, a contingent percentage which may be appropriate for application against a recovery obtained from a third party (or more realistically, its insurance carrier) would probably be excessive and exorbitant, and hence unreasonable, when applied to medical payments made, without dispute, by the client’s own carrier. However, a rule universally forbidding the application of any contingency arrangements to medical payments coverage would be inappropriate, because disputes could arise as to the amounts payable, as well as coverage, which could require the lawyer’s services. Therefore, such fee arrangements must be scrutinized in the light of the applicable facts and circumstances. The fact that the contingent fee contract in question might specifically provide for the inclusion of such payments in the percentage calculated would, however, be irrelevant to the determination of whether the resulting fee would in fact be “reasonable.”