VSB Standing Committee on Legal Ethics Seeking Public Comment on Legal Ethics Opinion 1858

Additional Info view draft of proposed LEO 1858 (PDF file)

Pursuant to Part Six: Section IV, Paragraph 10-2(C) of the Rules of the Supreme Court of Virginia, the Virginia State Bar’s Standing Committee on Legal Ethics (“Committee”) is seeking public comment on proposed advisory Legal Ethics Opinion 1858, May a Lawyer Agree to Indemnify an Insurance Company as a Condition of Settlement?

This proposed opinion involves a hypothetical personal injury suit in which the defendant is represented by her insurance company’s staff counsel.  As part of the proposed settlement, the defendant’s lawyer requests that the plaintiff’s lawyer agree to indemnify the insurer against liens in the event that they are not paid from the settlement proceeds or from the plaintiff himself.  The Committee is asked: 1) whether the plaintiff’s lawyer can agree to indemnify a defendant and her insurer for any third-party lien claim against settlement proceeds received by the plaintiff; and 2) whether the defendant’s counsel can request or demand such an indemnification agreement.  In addressing the first question, the Committee opines that the plaintiff’s lawyer would violate Rule 1.8(e) if he/she agreed to indemnify the defendant’s insurer because the agreement would obligate the lawyer to pay the client’s debts.  This obligation would constitute improper financial assistance to the client. The agreement also creates a conflict of interest in violation of Rule 1.7(a) because such an agreement places the lawyer in a position of avoiding personal liability, which may be at odds with the client’s desire to settle the case.  As to the second question, the Committee opines that the defendant’s lawyer would violate Rule 8.4(a) if he/she included such a provision in the settlement agreement.  The defendant’s lawyer’s insistence that the plaintiff’s lawyer enter into the agreement, as a condition to settlement, is an inducement to the plaintiff’s lawyer to violate Rules 1.7(a) and 1.8(e).

Inspection and Comment
The proposed advisory opinion may be inspected at the office of the Virginia State Bar, 707 East Main Street, Suite 1500, Richmond, Virginia 23219-2800, between the hours of 9:00 a.m. and 4:30 p.m., Monday through Friday.  Copies of the proposed advisory opinion can be obtained from the offices of the Virginia State Bar by contacting the Office of Ethics Counsel at 804-775-0557, or can be found at the Virginia State Bar’s website at http://www.vsb.org. Not later than June 2, 2011, any individual, business, or other entity may file or submit to Karen A. Gould, the Executive Director of the Virginia State Bar, a written comment in support of or in opposition to the proposed advisory opinion.

Updated: Apr 13, 2011