When a lawyer agrees to 'protect' a treating doctor's fees out of a personal-injury client's recovery, what are the lawyer's duties, and may the lawyer charge the doctor a collection fee?

Plain-English summary

This disciplinary matter arose from a complaint by Dr. S, an orthopedic surgeon who treated N for injuries from an automobile accident. N retained the respondent attorney on a one-third contingent fee to recover damages. When the respondent asked Dr. S for a medical report, the doctor's office conditioned it on a $50 payment and a statement signed by N agreeing to pay the doctor's fees out of any recovery. The respondent sent the $50 but not the statement, and later wrote that he would "protect" the doctor's fees out of any recovery; the doctor then sent the report.

The respondent settled N's case for $10,000 and gave N a settlement sheet, approved by N, that provided for payment of the doctor's $1,500 fee. The respondent contended he had told N he would charge Dr. S a $250 fee for collecting the bill, but Dr. S would not agree to pay it. In March 1980 the respondent told N he could not get the doctor to pay the $250, and in April 1980 he paid N the $1,521.20 he had withheld for the doctor. N did not pay Dr. S, who has never been paid. The funds the respondent had withheld, and the $10,000 settlement, were deposited in the respondent's general office account rather than a client or trustee's account.

The Committee made several points. No provision of the Code precludes a lawyer from letting a client authorize the lawyer to withhold from a recovery the sums needed to pay the treating doctor's accrued bills, and N had so authorized; but the lawyer must remember he represents the client, not the physician, and must preserve the client's right to object to unreasonable charges. The respondent's claim of a right to a $250 fee for collecting Dr. S's bill was without merit, because Dr. S never agreed to employ or pay him, and without the consent of both N and Dr. S it would be improper to represent both. Quoting Drinker, the Committee noted that a lawyer who, with the client's approval, agrees to pay an examining doctor a specified amount on recovery is professionally reprehensible if he settles without providing for the doctor's fee.

The Committee found a clear violation of DR 9-102(A): the client's funds were deposited and commingled with the respondent's own funds. It concluded that the respondent's demand of a fee from Dr. S was improper, and that, having agreed with his client's acquiescence to protect the doctor's fees out of any recovery, his failure to do so simply because Dr. S refused to pay him a fee was professionally reprehensible. The respondent was reprimanded.

Currency note

This opinion was issued in 1982, before West Virginia replaced its Code of Professional Responsibility (the DR provisions cited here) with the Rules of Professional Conduct, effective January 1, 1989, and before later rule revisions, including the comprehensive 2015 amendments. The trust-account rule has since been recodified and supplemented by IOLTA requirements. 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: May a lawyer agree to pay a client's treating doctor out of the settlement?

A: Yes, with the client's authorization. The opinion stated that no Code provision precludes a lawyer from letting a client authorize withholding the doctor's accrued fees from a recovery, so long as the lawyer remembers he represents the client and preserves the client's right to object to unreasonable charges.

Q: Can the lawyer charge the doctor a fee for collecting the doctor's bill?

A: No, not without the doctor's agreement. The opinion found the respondent's claim to a collection fee meritless because the doctor never agreed to employ or pay him, and noted that representing both the client and the doctor without the consent of each would be improper.

Q: What rule did the lawyer violate by handling the money the way he did?

A: DR 9-102(A). The opinion found the respondent commingled his client's funds with his own by depositing the withheld doctor's fees and the settlement proceeds in his general office account rather than a client trust account.

Q: What happened when the lawyer refused to pay the doctor?

A: The opinion concluded that, having agreed with his client's acquiescence to protect the doctor's fees out of the recovery, the respondent's failure to pay simply because the doctor would not pay him a fee was professionally reprehensible, and the respondent was reprimanded.

Background and rules framework

The decision turned on the trust-account rule, DR 9-102(A) of the Code of Professional Responsibility, which requires client funds to be kept in identifiable accounts separate from the lawyer's own funds, with only limited exceptions. The Committee combined that requirement with the lawyer's duty of loyalty to the client (not the treating physician) and the principle that a lawyer who promises to protect a third party's fees out of a recovery must honor that promise. It cited Henry S. Drinker's treatise on legal ethics for the proposition that settling without providing for a doctor's agreed fee is professionally reprehensible.

Citations and references

Rules of Professional Conduct (Code of Professional Responsibility, as cited):

• DR 9-102(A) (client funds, other than advances for costs and expenses, must be kept in identifiable accounts separate from the lawyer's own funds; no commingling)

Other authorities cited:

• Henry S. Drinker, Legal Ethics: a lawyer who agrees with the examining doctor, with the client's approval, to pay a specified amount on recovery is professionally reprehensible if he settles without providing for the doctor's fee

See also

• WVSB Ethics Op. 2013-01: "Indemnify and hold harmless" settlement language
• WVSB Ethics Op. 83-6: Legal aid society advancing medical-examination costs
• WVSB Ethics Op. 2016-01: Third-party loans to advance litigation costs

Source

• Landing page: https://wvodc.org/Legal-Ethics-Opinion
• Original PDF: https://storage.googleapis.com/msgsndr/Rgd68xOkcVdteTsBkf6O/media/66a7ea7e3c9fe0c9cb45e810.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain; the linked PDF is authoritative.

L.E.I. 82-5 (L.E.C. 80-22)

(October 8, 1982)

DUTIES OF LAWYER CONCERNING "PROTECTION" OF DOCTOR'S FEES OUT OF CLIENT'S RECOVERY

The essential facts in this case are undisputed. Dr. S, the complainant, is an orthopedic surgeon. He treated N for injuries sustained by him in an automobile accident. N retained the respondent attorney to represent him in his attempt to recover damages for his injuries. The evidence shows that the respondent and N agreed upon a contingent fee of one-third of any amount recovered, with N to pay costs and expenses.

During the course of his representation of N, the respondent wrote to Dr. S for a report of his diagnosis, treatment and prognosis of N. The doctor's office replied that such a report would be forthcoming upon receipt of $50.00 to cover the costs of preparing the report and a statement signed by N agreeing to pay the doctor's fees out of any recovery.

The respondent sent a check for $50.00 to Dr. S but did not send the requested statement or mention the same in his letter enclosing the check. The doctor wrote acknowledging receipt of the $50.00 and again requested a statement that his fees would be paid out of any recovery or settlement.

The respondent wrote to Dr. S that he would "protect" the doctor's fees out of any recovery. The narrative medical report was then sent to the respondent.

In May, 1979, the respondent settled N's case for $10,000.00. On June 15, 1979, the respondent made settlement with N and gave to N a settlement sheet approved by N, which provided for the payment of the doctor's fees in the amount of $1,500.00.

The respondent stated that he advised N at that time that he was going to charge Dr. S a fee of $250.00 for collecting his bill. N was not sure that this statement was made to him at the time of the settlement. He testified he thought it was made at a later date. An affidavit of N, prepared by the respondent after this complaint was made, indicates that the respondent told N he would charge Dr. S a fee for collecting his bill at the time of settlement.

Dr. S would not agree to pay the respondent a fee of $250.00 to be deducted from the $1,500.00 which the respondent had withheld from the settlement for the purpose of paying his fees.

In March, 1980, the respondent called N to his office and advised him that he could not get the doctor to pay him $250.00. On April 2, 1980, N went to the respondent's office and the respondent paid to him $1,521.20, being the amount of the doctor's fees which he had withheld. N, although advised by the respondent to pay Dr. S, did not do so. Dr. S has never been paid for the services which he rendered to N.

It is clear from the evidence that the $1,521.20 which was held by the respondent from June 15, 1979, until April 2, 1980, was not placed in any client or trustee's account but was deposited in the respondent's account from which he paid personal and office expenses. Likewise, the $10,000.00 which was received in settlement of N's claim was also deposited in the respondent's general office account.

The respondent contends that he was Dr. S's agent or attorney for the collection of his fees from N. The doctor denies any such agency or representation.

There is no provision of the Code of Professional Responsibility which would preclude a lawyer from permitting his client to execute an authorization empowering and directing him to withhold from any settlement or recovery all sums necessary to pay the accrued bills of the treating doctor. In this case, it appears that the client, N, agreed to the withholding of his doctor's accrued fees for services rendered to him.

Obviously, an attorney must always keep in mind that his responsibility is to represent the interests of the client and not the physician. He must be careful where necessary to preserve the right of the client to object to any unreasonable and unnecessary charges or otherwise to raise any defenses which he might have in any conventional action brought by the doctor to recover for his services. In this case, the client does not object to the amount of the doctor's fees.

The respondent's claim that he has a right to a fee for collecting Dr. S's fees is without merit. There was no agreement by Dr. S to employ the respondent or pay him a fee, and the respondent has no right to such a fee. Furthermore, without the consent of N and Dr. S, it would be improper for the respondent to represent both of them in the same matter.

We agree with the respondent that it would be unethical for a lawyer to agree to pay his client's medical expenses without an agreement for reimbursement. Such is not the case here. The respondent was authorized to withhold from the settlement the doctor's fees and to pay them. The respondent agreed to "protect" the doctor's fees out of any recovery or settlement.

In his treatise on legal ethics, Henry S. Drinker states:

A lawyer who, in an accident case, made, with the client's approval, an agreement with the examining doctor witness, that he be paid a specified amount in the event of recovery, is professionally reprehensible in making settlement without providing for the doctor's fee.

This Committee is of the opinion that under the present Code of Professional Responsibility it is not proper for a lawyer to pay the costs and expenses of [sic] to be reimbursed therefor by his client. A lawyer may advance costs of litigation, subject to reimbursement. As indicated above, there is likewise no provision of the Code of Professional Responsibility which precludes a lawyer from withholding from a settlement or recovery the accrued charges of the attending physician, if the client consents or authorizes such action. Likewise, there is no provision of the Code of Professional Responsibility which precludes a lawyer from permitting his client to execute an authorization to withhold from a settlement or recovery and to pay to an attending physician his accrued fee. Before permitting his client to sign such an authorization, the lawyer should be careful to preserve the right of his client to object to any unreasonable or unnecessary charges or to raise any defenses he might have to an action brought by the doctor to recover such fees.

DR 9-102(A) of the Code of Professional Responsibility provides:

(A) All funds of clients paid to a lawyer or law firm, other than advances for costs and expenses, shall be deposited in one or more identifiable bank accounts maintained in the state in which the law office is situated and no funds belonging to the lawyer or law firm shall be deposited therein except as follows:

(1) Funds reasonably sufficient to pay bank charges may be deposited therein.

(2) Funds belonging in part to a client and in part presently or potentially to the lawyer or law firm must be deposited therein, but the portion belonging to the lawyer or law firm may be withdrawn when due unless the right of the lawyer or law firm to receive it is disputed by the client, in which event the disputed portion shall not be withdrawn until the dispute is finally resolved.

The respondent has violated this provision of the Code of Professional Responsibility. The funds belonging to his client were deposited and commingled with his own funds.

The Committee is of the opinion that the action of the respondent in demanding a fee of Dr. S was improper and that having agreed to protect the doctor's fees out of any settlement or recovery with his client's acquiescence, his failure to do so, simply because Dr. S refused to pay him a fee, was professionally reprehensible.

The respondent is hereby reprimanded.