Can a law firm act as a title insurance agency under its own firm name, or must it form a separate entity?

Plain-English summary

A lawyer asked whether a law firm could act as a title insurance agency under the firm's own name, or whether it had to establish a separate corporate entity for that purpose.

The committee said the Rules of Professional Conduct do not require a separate entity, as long as the firm's method of operating as a title insurance agency does not otherwise violate the Rules. It cautioned that if anyone other than a lawyer in the firm acts as a title insurance agent, that conduct would probably violate Rule 5.4 and could potentially violate Rule 5.5; establishing a separate entity in which non-lawyers as well as lawyers act as title agents may avoid those violations.

Apart from a direct violation of Rule 5.4 or 5.5 where non-lawyer title agents are involved in the firm's business, the committee found no requirement that lawyers form a separate entity to act as a title agency. The potential ethical problems would arise from the actual manner and methods of operation, not from the form of the entity. The committee cross-referenced prior opinions on title-insurance arrangements: Opinion 75-03 (a lawyer connected with a title insurance company could not be named in the company's advertising, nor could the firm indicate use of such insurance on its letterhead), Opinion 90-16 (the firm may not use or recommend the title company except in accordance with Rules 1.7(b) and 1.8(f)), and Opinion 89-03 (disclosure of client-file information to the title insurance company must comply with Rule 1.6).

Currency note

This opinion was issued in 1991, before the South Carolina Bar's adoption of the 2005 revisions to the Rules of Professional Conduct. 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 Treat this page as historical context, not current guidance.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, deadline, or requirement mentioned here.

Common questions

Q: Must a law firm form a separate company to act as a title insurance agency?

A: The committee said no; the Rules do not require a separate entity as long as the firm's method of operating as a title agency does not otherwise violate the Rules.

Q: When would acting as a title agency violate the Rules?

A: The committee said that if a non-lawyer acts as the title insurance agent, that would probably violate Rule 5.4 and could violate Rule 5.5; a separate entity that includes non-lawyer agents may avoid those problems.

Q: What other limits apply to the title-insurance arrangement?

A: The committee pointed to prior opinions: the firm may not name a connected lawyer in the title company's advertising or letterhead (75-03), may use or recommend the company only under Rules 1.7(b) and 1.8(f) (90-16), and must protect client-file information under Rule 1.6 (89-03).

Background and rules framework

The opinion interprets Rule 5.4 (professional independence of a lawyer), corresponding to Model Rule 5.4, and Rule 5.5 (unauthorized practice of law), corresponding to Model Rule 5.5, and applies the firm definition in Rule 407. The committee located the ethical risk in how the firm operates the agency, particularly any non-lawyer involvement, rather than in the choice of entity form.

Citations and references

Rules of Professional Conduct:

• South Carolina RPC 5.4 / Model Rule 5.4: professional independence; non-lawyer involvement concerns.
• South Carolina RPC 5.5 / Model Rule 5.5: unauthorized practice of law.

Other opinions cited:

• SC Bar Advisory Opinion 75-03: a connected lawyer could not be named in the title company's advertising or on the firm's letterhead.
• SC Bar Advisory Opinion 90-16: use or recommendation of the title company only under Rules 1.7(b) and 1.8(f).
• SC Bar Advisory Opinion 89-03: disclosure of client-file information to the title company must comply with Rule 1.6.

See also

• SC Bar Ethics Op. 92-03: Lawyer as Title Insurance Agent
• SC Bar Ethics Op. 92-27: Lawyer-Defendants in a Land Suit
• SC Bar Ethics Op. 91-30: Power of Attorney in a Real Estate Closing

Source

• Landing page: https://www.scbar.org/for-lawyers/quicklinks/legal-resources/ethics-advisory-opinions/ethics-advisory-opinion-91-21/

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 91-21

May a law firm act in the capacity of a title insurance agency under the name of the firm or should there be a separate corporate entity established for that purpose?

Summary:
The Rules of Professional Conduct do not require a law firm to establish a separate entity for the purpose of acting in the capacity of a title insurance agency as long as the method of operation of the law firm as a title insurance agency does not otherwise violate the rules.

Opinion:
This Opinion assumes that the definition of "law firm" as set forth in the question is the same as that established by the South Carolina Rules of Professional Conduct (Rule 407):

"Firm" or "law firm" denotes a lawyer or lawyers in a private firm, lawyers employed in the legal department of a corporation or other organization and lawyers employed in a legal services organization. See Comment, Rule 1.10.

If anyone other than a lawyer in the law firm is acting in the capacity of a title insurance agent, such conduct would probably violate Rule 5.4 and could potentially violate Rule 5.5. The establishment of a separate entity where non-lawyers as well as lawyers would be acting as title insurance agents may avoid any violation of the foregoing rules. See SC Bar Advisory Opinion 90-16.

Except in the case of a direct violation of Rule 5.4 or Rule 5.5 where non-lawyer title agents might be directly involved in the business of the law firm, there appears to be no requirement that lawyers establish a separate entity to act in the capacity of a title agency. The potential ethical problems which might arise would result from the actual manner or methods of operation utilized by the law firm in acting in the capacity of a title agency and not from particular form of entity doing business. See SC Bar Advisory Opinion 75-03 (Lawyer connected with title insurance company could not be named in the advertising of the title insurance company, nor could the law firm indicate the use of such insurance of its letterhead); SC Bar Advisory Opinion 90-16 (The law firm may not utilize or recommend the title insurance company except in accordance with Rule 1.7(b) and Rule 1.8(f); SC Bar Advisory Opinion 89-03 (Disclosure of information to the title insurance company involving a client's file must be made only in accordance with Rule 1.6).