June 2015 Subrogation Ethics Update

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paTo sign or not to sign? That is the question…. With the surge in subrogation claims that has occurred in the last ten years insurance companies are seeking protection from a potential subrogation or lien interest down the road.  Not only do many require plaintiffs to sign a release with “hold harmless” language in it but, sometimes they ask that attorneys sign these agreements as well.

This can never be signed by any attorney.

Why? Because it is unethical for an attorney to acquire a financial interest in their client’s case.  In addition, logically it is silly as the attorney is not a party to the lawsuit and does not have the power to release any claims.

Not only is it unethical for an attorney to sign such a document, it is also unethical for an attorney to even ask another attorney to sign such a document.

In January of 2012 the Philadelphia Bar Association Professional Guidance Committee tackled this issue and found that the attorney was “prohibited from executing such a release by Pennsylvania Rules of Professional Conduct 1.7(a)(2) and (b)(4), as well as 1.8(e). The prohibitions in the cited Rules necessarily implicate other Rules, including 1.15(e) and (f).”  The PRPC rules can be found here.  Their inquiry dealt with a release that required “as a condition of settlement, that the client and the inquirer execute a release indemnifying them from any “claims, causes of action, fees, penalties and interest under the Medicare, Medicaid and SCHIP Extension Act of 2007.”

The Committee found that “an attorney cannot agree to personally indemnify a defendant against a claim that might accrue by reason of the client’s failure to reimburse health care services providers who would have a statutory and/or contractual right to recover the cost of accident-related medical services from the proceeds of the personal injury settlement.”

Furthermore, even simply requesting that an attorney agree to indemnify against lien claims creates a potential conflict of interest between the claimant and the claimant’s attorney.  This creates serious issues for any attorney who requests such a release.  The vast majority of states are of the same opinion as Pennsylvania:

As you can see, the law takes a very negative view on these agreements and they can cause issues for every attorney involved in them.  Therefore, it is imperative that no attorney ask for and no attorney sign such an agreement.  To see the full opinion from the Philadelphia Bar Association Professional Guidance Committee please click here.