I settled a PI case for two family members, but Medicare has a lien and one relative is terminally ill. Can I give part of my fee back to them?

Plain-English summary

The inquiring attorney represented two family members involved in a serious automobile accident. The medical bills were substantial and exceeded the coverage available through the driver's policy. A settlement was received, and half of the attorney's contingency fee was taken, with the other half held in escrow pending the panel's opinion. The attorney asked whether he or she could return a portion of the fee to the family members when Medicare had a lien against the settlement; one family member had terminal cancer and required continuous medical care.

The panel applied Rule 1.15 ("Safekeeping Property"), whose subsection (b) requires a lawyer holding funds in which a client or third person has an interest to promptly notify that person and to deliver the funds they are entitled to receive.

The panel reasoned that because Medicare had an interest in the personal injury settlement, the attorney must promptly deliver to Medicare the funds it was entitled to receive. It concluded that if the attorney reduced his or her fee, that portion of the fee was owed to Medicare pursuant to Rule 1.15. The panel added that the attorney was not prohibited from gifting money to the relatives from the attorney's own personal funds.

Currency note

This opinion was issued in 1995, after the Rhode Island Supreme Court adopted the Model Rules of Professional Conduct effective November 15, 1988, and it applies Rule 1.15 as originally adopted. The Rhode Island Supreme Court later revised the Rules of Professional Conduct in 2007 as part of the nationwide Ethics 2000 process, and the federal Medicare secondary-payer rules that underlie the lien are governed by separate substantive law. Subsequent rule amendments or later opinions may have changed the analysis. Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific rule mentioned here.

Common questions

Q: Could the attorney give a reduced fee back to the clients to help with medical needs?

A: Not from the settlement. The opinion held that if the attorney reduced the fee, that portion was owed to Medicare under Rule 1.15, because Medicare had an interest in the settlement.

Q: Did the client's terminal illness change the analysis?

A: The opinion acknowledged the hardship but still directed that funds in which Medicare had an interest be delivered to Medicare; it did not create a hardship exception to Rule 1.15.

Q: Could the attorney help the family at all?

A: Yes, from personal funds. The opinion stated the attorney was not prohibited from gifting money to the relatives from the attorney's own personal funds.

Background and rules framework

The opinion applied Rhode Island Rule of Professional Conduct 1.15(b) (Model Rule 1.15), which requires prompt notice to, and delivery of funds to, a client or third person with an interest in property the lawyer holds. The panel treated Medicare as a third person with an interest in the settlement, so funds it was entitled to receive, including any reduced portion of the fee, had to go to Medicare rather than to the clients. The lawyer's own money remained outside Rule 1.15.

Citations and references

Rules of Professional Conduct:

• Model Rule 1.15 / RI RPC 1.15(b) (safekeeping property; prompt delivery of funds to a third person with an interest)

See also

• RI EAP Op. 95-27: A medical lien signed by prior counsel on settlement funds
• RI EAP Op. 95-12: A disputed medical lien on settlement funds

Source

• Landing page: https://www.courts.ri.gov/attorney-resources/Pages/Ethics-Advisory-Panel-default.aspx
• Original PDF: https://www.courts.ri.gov/Opinions/EAP%2095-29.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain; the linked PDF is authoritative.

FINAL

ETHICS ADVISORY PANEL
OPINION # 95-29, Request # 592
Issued July 13, 1995

The inquiring attorney represents two family members who were involved in a serious automobile accident. Medical bills were substantial and exceeded the amount of coverage available through the driver's policy. A settlement was received and half of the inquiring attorney's contingency fee was taken. The other half remains in escrow pending this Panel's opinion. The inquiring attorney asks whether he/she can return a portion of the fee to his family members when there is a lien against the settlement by Medicare. One family member has terminal cancer and requires continuous medical care.

Rule 1.15 entitled "Safekeeping Property" applies to this inquiry. The Rule states in pertinent part:

(b) Upon receiving funds or other property in which a client or third person has an interest, a lawyer shall promptly notify the client or third person. Except as stated in this rule or otherwise permitted by law or by agreement with the client, a lawyer shall promptly deliver to the client or third person any funds or other property that the client or third person is entitled to receive and, upon request by the client or third persons, shall promptly render a full accounting regarding such property.

Because Medicare has an interest in the personal injury settlement, the inquiring attorney shall promptly deliver to Medicare the funds it is entitled to receive. If the inquiring attorney reduces his/her fee, then that portion of the fee is owed to Medicare pursuant to Rule 1.15. The Panel opines that the inquiring attorney is not prohibited from gifting money to his/her relatives from his/her personal funds.