Informal Opinion Number: 20020002

Attorney’s firm is bidding to enter into a contract with a liability insurer to defend claims brought against its insureds on a flat fee basis. This fee would be the same regardless of the complexity of the case, venue and personal exposure over the limits.
Question 1. Does this arrangement violate Rule 4-1.8(f)(2) in that the insurer could potentially interfere or compromise Attorney’s judgment?
Question 2. Does this arrangement violate Rule 4-1.7(b) in that the insurer limits Attorney’s responsibilities to the insured clients?
Question 3. Does this arrangement violate Rule 5.4(c) in that the insurer could direct or regulate Attorney’s professional judgment in rendering legal services to the client-insured?
Question 4. Could a situation arise where the insured and Attorney determine that the matter should be settled and the third party insurer wants the matter to go to trial, create a conflict of interest under the rules?
Question 5. Does a flat fee arrangement automatically put Attorney and client in a financial conflict of interest, like a medical doctor in an HMO who is encouraged to provide the absolute minimum in medical care to the patient?
ANSWER: Attorney should act consistent with the over-riding principle that “a lawyer shall not accept compensation for representing a client from one other than the client unless: 1) the client consents after consultation, 2) there is no interference with the lawyer’s independence of professional judgment or with the attorney-client relationship, and 3) information relating to the representation of the client is protected under 1.6” – the confidentiality rule. (Rule 4-1.8(f)).
Questions 1 & 3. Attorney needs to make it clear to the insurance company that Attorney is bound by Rule 4-1.8 and that Attorney’s representation of the client must be governed by Attorney’s professional judgment. Attorney should consult with the client about the possibility of any limitations by the insurance company, at the outset of the representation. Attorney should explain to the insured that Attorney is employed by the insurance company. Attorney should also inform the insured that the insured may hire his or her own attorney, if he chooses, subject to any restrictions provided in their insurance contract or as provided by law. However, the insurance company, as Attorney’s employer, cannot dictate how Attorney handles the matter for an individual client in conflict with Attorney’s professional judgment. The fact that a flat fee is to be paid for Attorney’s legal services, regardless of complexity of the case, will not in itself constitute a violation of 4-1.8(f). Likewise, Attorney’s responsibilities to the client are not limited, as Attorney suggests, simply because Attorney’s compensation may be less than Attorney would customarily receive for a similar case.
Question 2. Attorney indicates that the insurer “limits the attorney’s responsibilities to the insured client” but Attorney does not present any facts in that regard. It is difficult to respond under the circumstances. However, Attorney’s responsibility to the client is the same whether the insurance company is paying Attorney a flat fee or the client is paying Attorney directly. The insurance company cannot limit Attorney’s responsibilities. Attorney should make the client aware of the limitations that they may be subject to under the contract of insurance that they have with the insurance company.
Question 4. The circumstance Attorney has described is possible. The reverse circumstance is also possible. Rule 4-1.8(f) governs Attorney’s responsibility in that accepting a fee from another should not inhibit Attorney’s professional judgment to act in the insured’s best interest. If a conflict of interest does arise, Attorney will have to look to Rule 4-1.7(b) and inform the client of the situation and then determine if Attorney would need to withdraw.
Question 5. If a flat fee arrangement will affect Attorney’s representation such that Attorney will not provide an appropriate level of representation, Attorney should not accept the representation on that basis. Attorney must provide the same level of representation to all clients, regardless of the compensation Attorney receives, unless Attorney’s representation is limited by express agreement with the client(s).

Informal Opinions are ethics advisory opinions issued by the Office of Legal Ethics Counsel to members of the Bar about Rule 4 (Rules of Professional Conduct), Rule 5 (Complaints and Proceedings Thereon), and Rule 6 (Fees to Practice Law) pursuant to Missouri Supreme Court Rule 5.30(c). Written summaries of select Informal Opinions are published for informational purposes as determined by the Advisory Committee of the Supreme Court of Missouri pursuant to Rule 5.30(c). Informal opinion summaries are advisory in nature and are not binding. These opinions are published as an educational service and do not constitute legal advice.

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