Can a lawyer oversee a public adjuster who is engaged in the unauthorized practice of law?

Plain-English summary

A commercial insured suffered a fire loss in South Carolina and retained a non-resident public adjuster, to be paid a percentage of the insurance proceeds, to adjust the loss. The insured then sought to retain a South Carolina lawyer (with no other connection to the adjuster) to oversee the adjuster's activities. The questions, assuming the adjuster's work constitutes the unauthorized practice of law, were whether the lawyer would commit any impropriety by overseeing the adjuster, and whether the answer changed if the lawyer was present during settlement negotiations.

The committee said the legal determination of whether a nonlawyer is engaged in the unauthorized practice of law is beyond its function, and assumed for the opinion that the adjuster was so engaged regardless of lawyer oversight. On that assumption, Rule 5.5(b) prohibits a lawyer from assisting a nonlawyer in performing an activity that constitutes the unauthorized practice of law, and because the oversight role is tantamount to assistance, it would be prohibited; the lawyer's presence during settlement negotiations would not alter that prohibited assistance had occurred. The committee noted that while the Comment to Rule 5.5 allows lawyers to provide professional advice and instruction to nonlawyers whose employment requires legal knowledge (for example, claims adjusters), such advice is permitted only where the nonlawyer's employment activity itself would not constitute the unauthorized practice of law. It added that Rule 5.3 and the Comment to Rule 5.5 address a lawyer's responsibilities for nonlawyer employees and assistants, but the facts showed no such relationship between the lawyer and the public adjuster, so those authorities did not apply.

Currency note

This opinion was issued in 1998, 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 Treat this page as historical context, not current guidance.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: Can a lawyer oversee a public adjuster who is engaged in the unauthorized practice of law?

A: Assuming the adjuster is so engaged, the committee concluded no: Rule 5.5(b) bars assisting a nonlawyer in the unauthorized practice of law, and the oversight is tantamount to assistance.

Q: Does it matter if the lawyer attends the settlement negotiations?

A: The committee concluded no: the lawyer's presence during settlement negotiations would not change that prohibited assistance had occurred.

Q: Can a lawyer ever advise a claims adjuster?

A: The committee noted that Rule 5.5's Comment permits advising nonlawyers whose work requires legal knowledge, but only where the nonlawyer's activity itself does not constitute the unauthorized practice of law.

Background and rules framework

The opinion interpreted South Carolina RPC 5.5(b) (assisting a nonlawyer in the unauthorized practice of law) and RPC 5.3 (responsibilities regarding nonlawyer assistants), corresponding to the like-numbered Model Rules, while assuming, without deciding, that the public adjuster's activity was the unauthorized practice of law.

Citations and references

Rules of Professional Conduct:

• South Carolina RPC 5.5(b) / Model Rule 5.5: assisting the unauthorized practice of law.
• South Carolina RPC 5.3 / Model Rule 5.3: responsibilities regarding nonlawyer assistants.

See also

• SC Bar Ethics Op. 00-03: Lawyer Aiding a Bank Closing
• SC Bar Ethics Op. 00-04: Giving a Bank a Legal Description

Source

• Landing page: https://www.scbar.org/for-lawyers/quicklinks/legal-resources/ethics-advisory-opinions/ethics-advisory-opinion-98-37/

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 98-37

A commercial insured suffers a fire loss in South Carolina and retains a public adjuster who is not a resident of South Carolina for purposes of adjusting the fire loss. The public adjuster will be paid a percentage of the insurance proceeds as his fee or commission. The insured seeks to retain a South Carolina lawyer (who has no other connection with the public adjuster) to oversee the activities of the public adjuster.

QUESTIONS:

1. Assuming that one acting as a public adjuster in South Carolina is engaged in the unauthorized practice of law, would the lawyer representing the insured commit any unethical impropriety by undertaking this arrangement?
2. Does the answer to Question 1 change if the lawyer is present during any settlement negotiations?

SUMMARY:
Assuming that one acting as a public adjuster in South Carolina is engaged in the unauthorized practice of law, a lawyer may not oversee the activities of such adjuster, whether or not the lawyer is also present during any settlement negotiations.

OPINION:
The legal determination of whether a nonlawyer has engaged in the unauthorized practice of law is beyond the scope of this Committee's function. For purposes of this Opinion, the facts assume that a public adjuster is engaged in the unauthorized practice of law, irrespective of lawyer oversight.

Rule 5.5(b) of the South Carolina Rules of Professional Conduct prohibits a lawyer from assisting a nonlawyer in the performance of an activity that constitutes the unauthorized practice of law. Being tantamount to assistance, the lawyer's oversight role would thus be prohibited under the Rule. The lawyer's presence during any settlement negotiations would not alter the fact that prohibited assistance had occurred. Although the Comment to Rule 5.5 states that the Rule "...does not prohibit lawyers from providing professional advice and instruction to nonlawyers whose employment requires knowledge of law; for example, claims adjusters...:, such advice and instruction would only be permitted where the nonlawyer's employment activity, in and of itself, would not constitute the unauthorized practice of law.

Rule 5.3, and further Commentary to Rule 5.5, sets forth certain responsibilities of a lawyer with regard to nonlawyer employees, independent contractors, retainees, associates and assistants. The facts do not indicate any such relationship between the lawyer and the public adjuster which, thus such authorities are not applicable.