The Florida Bar

April 20, 1973

There is no ethical objection to members of a law firm having a substantial interest in a title insurance company so long as any client referred to the company is informed of that interest and the company is not used to feed legal business to the firm.

[Note: Lawyers who refer clients to a business in which the lawyer owns an interest must comply with Rule 4-1.8(a), regarding business transactions with clients.]

CPR: EC 2-21
Opinions: 59-38, 63-12, 64-45, 70-16, 72-26; ABA Informal C731, 883

Vice Chairman Zehmer stated the opinion of the committee:

The inquiring attorney's firm intends to organize, in conjunction with other parties, a corporation for profit to act as title insurance agents for the purpose of issuing title insurance to real estate vendees and mortgagees. The members of the inquirer's law firm will own the majority of the stock. Although the title insurance business will be conducted in cities where the law firm maintains offices, the title company will conduct its business from a location substantially distant from the location of the law office. The inquirer further states that members of his firm would be directors of the title company, but would take no part in its day to day operations. His firm would probably issue title opinions to the title company upon which various title policies would be written.

The inquirer also states that employees of the title company would be instructed not to refer legal matters to the inquirer's firm and the inquirer's firm would refer business to the title company only upon solicitation by a client or third party with full disclosure that members of the law firm have a financial interest in the title company. The title company would not engage in the abstract business.

The inquirer asks whether there is any ethical objection to the members of his firm having a substantial interest in the title company so long as his firm does not use the title company as a “feeder” for the law practice and the members of the law firm do not mingle title company business either physically or functionally with their law practice.

It appears that the inquirer and the members of his law firm are cognizant of the ethical considerations involved and are taking every precaution to avoid them. They are meeting the requirements of EC 2-21, Code of Professional Responsibility, by disclosing to clients that members of the law firm have a financial interest in the title company. They are taking specific action to avoid the “feeder” problem. In short, the Committee finds no ethical impropriety under these circumstances. See this Committee's opinions 59-38, 63-12 [since withdrawn], 64-45 [since withdrawn], 70-16 [since withdrawn], and 72-26. See also ABA Informal Opinions C731 and 883.

[Revised: 08-24-2011]