The Florida Bar
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OPINION 90-7
(March 1, 1991)
Withdrawn 4-10-06

Although it is not unethical per se for an attorney to enter into business transactions with clients, the proposal presented by the inquiring attorney, when viewed in its entirety, is fraught with conflict problems and thus is impermissible.

RPC: 4-1.7(b); 4-1.8(a); 4-1.10(a)
Opinions: 72-21, 72-26, 73-1, 88-15

The inquiring attorney presents three questions concerning the propriety of members of his law firm engaging in certain business transactions with firm clients. The questions presented are:

1. A partner (i.e., shareholder) or partners of the law firm become stockholders of an independent insurance agency. The agency acts in a brokerage capacity, i.e., it is not the insurance company, but rather sells insurance to its clients. The agency proposes to offer to sell casualty insurance policies to corporate clients of the law firm. Assuming disclosure of the attorney partner's interest in the agency to the law firm's clients, is there anything improper in the activity?

2. [W]ould any conflict arise if the client were to seek a legal opinion about the amount of insurance it was required to carry or the specific terms of a policy? Would it make any difference if the opinion were rendered by the attorney with the interest in the insurance agency or by another member of the firm?

3. Assuming a claim was made on an insurance policy by a client of the firm where the policy was sold to the client by the agency in which a firm partner had an interest, would there be any conflict were the insurance company to assign defense of the claim against the client to the law firm? [Emphasis in original.]

Although the inquirer has separated his inquiry into three questions, it is more appropriate to examine the proposal in its entirety. This will help bring the interests and issues involved more clearly into focus.

Generally speaking, a practicing attorney is not ethically precluded from also engaging in another, nonlaw business if certain ethical guidelines are observed. See, e.g., Florida Ethics Opinion 88-15. An attorney who wishes to refer law practice clients to another business in which the attorney has an interest, though, obviously faces a potential conflict of interest. In its advisory opinions, the Professional Ethics Committee of The Florida Bar has recognized this potential conflict but has indicated that such a referral is not ethically prohibited, provided that the referral is in the best interest of the client and that the attorney's personal interest in the transaction is fully disclosed to the client. See Florida Ethics Opinions 72-26; 73-1.

The issue of an attorney's business transactions with clients is now specifically addressed in the Florida Rules of Professional Conduct (Chapter 4, Rules Regulating The Florida Bar). Rule 4-1.8(a) provides:

(a) A lawyer shall not enter into a business transaction with a client or knowingly acquire an ownership, possessory, security, or other pecuniary interest adverse to a client, except a lien granted by law to secure a lawyer's fee or expenses, unless:

(1) The transaction and terms on which the lawyer acquires the interest are fair and reasonable to the client and are fully disclosed and transmitted in writing to the client in a manner which can be reasonably understood by the client;

(2) The client is given a reasonable opportunity to seek the advice of independent counsel in the transaction; and

(3) The client consents in writing thereto.

An attorney may enter into a business transaction with a client in accordance with the above rule, however, only if the requirements of the general conflict of interest rule, Rule 4-1.7, can be satisfied. Rule 4-1.7(b) provides:


(b) A lawyer shall not represent a client if the lawyer's exercise of independent professional judgment in the representation of that client may be materially limited by the lawyer's responsibilities to another client or to a third person or by the lawyer's own interest, unless:

(1) The lawyer reasonably believes the representation will not be adversely affected; and

(2) The client consents after consultation. [Emphasis added.]

Rule 4-1.7(b) permits an attorney to undertake or continue representations which involve a potential conflict between the attorney's personal interests and those of the client-such as an attorney-client business transaction-only if both conditions of this rule are satisfied. The comment to Rule 4-1.7 points out that, in some situations, it is improper for an attorney to ask a client to consent to representation notwithstanding an actual or potential conflict. The comment provides in pertinent part:

A client may consent to representation notwithstanding a conflict. However, as indicated in paragraph (a)(1) with respect to representation directly adverse to a client and paragraph (b)(1) with respect to material limitations on representation of a client, when a disinterested lawyer would conclude that the client should not agree to the representation under the circumstances, the lawyer involved cannot properly ask for such agreement or provide representation on the basis of the client's consent.

Ordinarily it would not be prohibited for the inquiring attorney to sell insurance to his law firm clients in accordance with the requirements of Rule 4-1.8(a). However, when the inquirer's proposal is considered in its entirety, ethical problems are apparent. Advising a client regarding the amount of insurance that the client needs, and then selling that client the insurance, presents an inherent conflict of interest. This is one of those conflicts, referred to in the above-quoted comment, that cannot be cured by asking for the client's consent. A disinterested attorney would recognize that an attorney should not put himself into such a position of conflict. Such a conflict exists regardless of whether the attorney advising the client is the firm member who owns the interest in the insurance agency. Rule 4-1.10(a).

The conflict between the attorney's personal interests and those of the client is highlighted by the inquiring attorney's indication that his firm also desires to be hired by the insurance company (to whom the attorney, as insurance agent, would owe a fiduciary duty) for the purpose of representing the client (to whom the attorney, as attorney, would owe a duty of undivided loyalty).

To summarize: Although it is not unethical per se for an attorney to engage in business transactions with a client, the proposal presented by the inquiring attorney is fraught with conflict problems and, consequently, it would be unethical for the inquirer to undertake the proposed course of conduct. See Florida Ethics Opinion 72-21.

[Revised: 08-24-2011]