What should a lawyer do with trust-account funds for a settlement check that an insurer never cashed years ago?

Plain-English summary

In 1999 a lawyer disbursed $8,000 to an insurance company to satisfy its claim in a personal-injury settlement. Six years later the check had not cleared, and the insurance company had not contacted the lawyer or the client. The question was what the lawyer should do with the $8,000 remaining in the trust account.

The committee concluded the lawyer must first be certain all requirements of Rule 1.15 have been met. Rule 1.15 requires that property belonging to clients or third persons be properly safeguarded, and South Carolina Appellate Court Rule 417 imposes strict financial-record requirements, including accounting for disbursements to third persons. The lawyer should also follow Ethics Advisory Opinion 02-05, which requires exhausting all reasonable means of notifying the insurance company, including notice by publication. Under the South Carolina Uniform Unclaimed Property Act (S.C. Code § 27-18-10 et seq.), the insurance company may be the owner of these funds, and a check mailed to an owner and not presented for payment is defined as unclaimed property. Because more than five years had passed, if all ethically required actions to disburse the funds have been attempted and the funds remain, the lawyer should consider proceeding as set out in the Unclaimed Property Act.

In practice

Under this opinion, on the facts presented, a lawyer holding funds for a years-old uncashed check should not simply keep them in trust indefinitely: the committee directs the lawyer to satisfy Rule 1.15 and Appellate Court Rule 417 safekeeping and record duties, exhaust notification per Opinion 02-05 (including publication), and then treat the funds under the Uniform Unclaimed Property Act, which classifies an uncashed mailed check as unclaimed property after the statutory period.

Common questions

Q: An insurer never cashed the settlement check I sent years ago. Can I just keep the money in trust forever?

A: The committee says no; after satisfying Rule 1.15 and exhausting notification under Opinion 02-05, you should proceed under the Uniform Unclaimed Property Act, which treats an uncashed mailed check as unclaimed property.

Q: What notification steps do I take first?

A: Per Rule 1.15 and Opinion 02-05, exhaust all reasonable means of notifying the payee, including notice by publication, and keep the financial records required by Appellate Court Rule 417.

Q: When does the Unclaimed Property Act apply?

A: The committee notes a check mailed to an owner and not presented for payment is unclaimed property, and that more than five years had passed; if the funds remain after all ethical steps, the lawyer should proceed under the Act (S.C. Code § 27-18-10 et seq.).

Background and rules framework

The opinion applies South Carolina's version of Model Rule 1.15 (safekeeping property) and South Carolina Appellate Court Rule 417 (financial recordkeeping), and points to the South Carolina Uniform Unclaimed Property Act (S.C. Code § 27-18-10 et seq.) as the disposition mechanism. It relies on the committee's Opinion 02-05 on notifying a missing payee.

Citations and references

Rules of Professional Conduct:

• MR 1.15 / SC Rule 1.15 (safekeeping client and third-person property)
• SC Appellate Court Rule 417 (financial recordkeeping; accounting for disbursements to third persons)

Statutes:

• South Carolina Uniform Unclaimed Property Act, S.C. Code § 27-18-10 et seq. (uncashed mailed check as unclaimed property)

Other opinions cited:

• SC Ethics Advisory Opinion 02-05 (exhausting reasonable means, including publication, to notify a missing payee)

See also

• SC Bar Ethics Op. 05-08: Holding disputed settlement funds against a subrogation claim
• SC Bar Ethics Op. 05-07: A charging lien on a client's support payments

Source

• Landing page: https://www.scbar.org/for-lawyers/quicklinks/legal-resources/ethics-advisory-opinions/ethics-advisory-opinion-05-15/

Original opinion text

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

UPON THE REQUEST OF A MEMBER OF THE SOUTH CAROLINA BAR, THE ETHICS ADVISORY COMMITTEE HAS RENDERED THIS OPINION ON THE ETHICAL PROPRIETY OF THE INQUIRER’S CONTEMPLATED CONDUCT. THIS COMMITTEE HAS NO DISCIPLINARY AUTHORITY. LAWYER DISCIPLINE IS ADMINISTERED SOLELY BY THE SOUTH CAROLINA SUPREME COURT THROUGH ITS COMMISSION ON LAWYER CONDUCT.

Ethics Advisory Opinion 05-15

RULE 1.15

Facts:
Lawyer disbursed $8,000 to insurance company in 1999 in satisfaction of the insurance company’s claim in a personal injury settlement. Six years, later the check has not cleared. The insurance company has not contacted the attorney or the client.

Question:
What should Lawyer do with the $8,000 remaining in the trust account?

Summary:
Lawyer has an obligation to safeguard property for clients and third persons. Under the Uniform Unclaimed Property Act, the owner is a creditor, claimant or payee or a person having a legal or equitable interest in property subject to this act, and a check that has been mailed to an owner and not presented for payment is unclaimed property. Lawyer should be certain that all actions set out in Rule 1.15 and Ethics Advisory Opinion 02-05 have been taken and then should disburse the funds in accordance with this act.

Opinion:
Lawyer should be certain that all requirements of Rule 1.15 have been met. Rule 1.15 requires that property belonging to clients or to third persons must be properly safeguarded. South Carolina Appellate Court Rule 417 also imposes strict requirements to maintain financial records. These include accounting for disbursements to third persons.

Lawyer should also follow the guidance of Ethics Advisory Opinion 02-05. This requires that Lawyer exhaust all reasonable means of notifying the insurance company including notice by publication.

Under the Uniform Unclaimed Property Act, South Carolina Code §27-18-10, et seq., the insurance company may be the owner of these funds. A check that is mailed to an owner and not presented for payment is defined in this act as unclaimed property. Since over five years have passed, if all ethically required actions to disburse the funds have been attempted and the funds remain in the account, Lawyer should consider proceeding as set out in the Uniform Unclaimed Property Act.