Can a lawyer accept a fee from an insurance company in exchange for advising and encouraging his clients and friends to adopt the company's tax-saving insurance plan?

Plain-English summary

An insurance executive approached a lawyer about a plan of insurance purportedly designed to save income and death taxes. The company invited the lawyer to study the plan and offered a "very liberal legal fee" for his cooperation if he decided the plan would be good for his friends and clients. The question was whether it was improper for the lawyer to enter such an arrangement and accept a fee from the insurance company.

The Committee said it would be improper as submitted. It explained that a lawyer generally may not serve two masters, though he can in some instances with full disclosure and consent under Canon 6, and that a lawyer may accept no secret rebates or commissions, though he can take a commission from others with the client's knowledge and consent after full disclosure under Canon 35. The proposed approach, the Committee said, is calculated, whether or not it succeeds, to cause the lawyer to carry out the insurance arrangements without revealing the true circumstances to the client, violating Canons 6 and 35, and to cause the lawyer to seek out clients and recommend the plan, which would be solicitation in violation of Canon 24. The Committee allowed that a client might independently seek the lawyer's advice on insurance and that the lawyer could in good faith recommend the plan while making the disclosures and obtaining the consent needed under Canons 6 and 35. But if the lawyer accepts and carries out the proposal as submitted, he could not avoid violating one or all of those three canons. The Committee ruled 9-0.

Currency note

This opinion was issued in 1963, under the former Texas Canons of Ethics, which the Texas Disciplinary Rules of Professional Conduct replaced effective January 1, 1990. 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 Treat this page as historical context, not current guidance.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 take a fee from an insurer for recommending its plan to clients?

A: Under this opinion, not as proposed. The Committee said accepting and carrying out the insurance company's arrangement as submitted would violate one or all of Canons 6, 24, and 35.

Q: Could a lawyer ever recommend such a plan?

A: The Committee said a client could independently seek the lawyer's advice on insurance and the lawyer could in good faith recommend the plan, provided he made the disclosures and obtained the consent required by Canons 6 and 35.

Q: Which duties did the proposal put at risk?

A: It risked the duty not to serve conflicting interests without disclosure and consent (Canon 6), the bar on secret commissions (Canon 35), and the bar on soliciting clients (Canon 24).

Background and rules framework

The opinion interprets former Texas Canons 6, on conflicting interests, 35, on compensation, commissions, and rebates, and 24, on solicitation. The modern analogs are ABA Model Rule 1.7, on concurrent conflicts of interest, Model Rule 1.8(f), on accepting compensation from someone other than the client, and Model Rule 7.3, on solicitation.

Citations and references

Rules of Professional Conduct:

• MR 1.7 (concurrent conflicts of interest), as the modern analog
• MR 1.8 (compensation from one other than the client, MR 1.8(f)), as the modern analog
• MR 7.3 (solicitation of clients), as the modern analog
• Texas Canons 6, 24, and 35 (former canons)

See also

• TX Ethics Op. 269: Lawyer-Executor Collecting Both a Commission and an Attorney's Fee
• TX Ethics Op. 301: Attorney-Executor Taking a Referral Fee From the Firm He Hired
• TX Ethics Op. 265: Soliciting Real Estate Business for a Friend in Hope of the Legal Work

Source

• Landing page: https://www.legalethicstexas.com/resources/opinions/opinion-264/
• Original PDF: https://tcle-web.s3.amazonaws.com/public/documents/Opinion_264.pdf

Original opinion text

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

QUESTION PRESENTED

A lawyer is approached by an insurance executive concerning a plan of insurance purportedly designed to save income and death taxes. The lawyer is invited to study the plan, and the insurance company offers to pay a "very liberal legal fee" for the lawyer's cooperation if he decides the plan will be good for his friends and clients. Is it improper for a lawyer to enter into such an arrangement and to accept a legal fee from an insurance company under such circumstances?

18 Baylor L. Rev. 340 (1966)

SOLICITATION - ADVERSE INFLUENCE AND CONFLICTING INTERESTS - COMPENSATION, COMMISSIONS AND REBATES
It would be a violation of the Canons for a lawyer to enter into an agreement with an insurance company in which the lawyer accepts a legal fee for advising and encouraging his clients and friends to adopt a plan of insurance purportedly designed to save income and death taxes.

Canons 6, 35, 24.

Generally, a lawyer may not serve two masters, although he can in some instances with full disclosure and consent. (Canon 6.) Likewise, a lawyer may accept no secret rebates or commissions, although he can take a commission from others if it is with the knowledge and consent of the client after full disclosure. (Canon 35.) However, it would seem that an approach like that in question is calculated (whether or not it succeeds) to cause the lawyer to carry out all arrangements for the insurance without revealing to the client the true circumstances, which action would be in violation of Canons 6 and 35. And such approach would also seem to be calculated to cause the lawyer to seek out clients and recommend this plan, which would constitute solicitation in violation of Canon 24.

It is possible that a client could seek out the lawyer for legal services regarding insurance and that the lawyer could in good faith recommend this plan and that the lawyer at the same time would make such disclosure and obtain such consent as is necessary for compliance with Canons 6 and 35. However, it is the opinion of the committee that, if a lawyer accepts and carries out the proposal as submitted by the insurance company, he could not but violate one or all three of the above-mentioned Canons. (9-0.)

Tex. Comm. On Professional Ethics, Op. 264 (1963)