May a Vermont plaintiff's lawyer indemnify the defendant's insurer against a health insurer's settlement lien?
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This page answers the general question as of 2013. Ask about yours and see what the current Vermont Rules of Professional Conduct say for your facts, with citations.
Plain-English summary
The plaintiff's personal injury case was tentatively settled. The plaintiff's health insurer claimed reimbursement for medical bills it had paid. The defendant's liability insurer asked plaintiff's counsel to sign a hold-harmless agreement making counsel responsible if the health insurer's claim was unpaid and the liability insurer later had to pay it.
The committee distinguished the lawyer's Rule 1.15 duties for settlement property from the proposed personal guarantee. Rule 1.15 may require notice, payment of undisputed funds, and separation of disputed funds, but the proposed agreement would go further by exposing the lawyer personally to the client's reimbursement obligation.
The committee held that this exposure is prohibited financial assistance under Rule 1.8(e) and does not fit the rule's exceptions for litigation costs and expenses. It also noted the possible conflict between a lawyer's financial exposure and the client's choice whether to settle, but did not decide whether that conflict could be waived. Because signing was prohibited, it did not answer whether the lawyer would otherwise be obliged to sign.
In practice
For the proposed settlement term, the opinion bars counsel's personal promise to protect the liability insurer against an unpaid health-insurer claim. It leaves the lawyer's separate handling of funds in which the health insurer claims an interest under Rule 1.15.
Common questions
Q: Can the lawyer sign the insurer's proposed hold-harmless agreement?
A: No. The opinion treats the agreement as financial assistance to the client in litigation that Rule 1.8(e) prohibits.
Q: Is the proposed indemnity the same as safeguarding settlement proceeds?
A: No. The opinion says Rule 1.15 duties concerning third-party interests do not extend to personally indemnifying the liability insurer.
Q: Did the committee decide whether the lawyer was obliged to sign?
A: No. Once it concluded signing would violate the rules, it declined to reach that second question.
Background and rules framework
The opinion centers on Vermont Rule 1.8(e), while discussing Rule 1.15(d) and (e) for settlement funds and Rules 1.2 and 1.7 for the possible tension between counsel's finances and the client's settlement choice.
Citations and references
Vermont Rules of Professional Conduct:
- Rules 1.2, 1.7, 1.8(e), 1.15(d), 1.15(e), and 8.4(a)
Other opinions cited:
- Florida Bar Staff Opinion 30310, plaintiff counsel's indemnity of a defendant
- North Carolina State Bar Ethics Opinion RPC 228, settlement indemnity
See also
Source
- Landing page: VBA conflict of interest opinions
- Original PDF: Vermont Advisory Opinion 13-01
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