Opinion 00-2 (Reconsideration)
FLORIDA BAR ETHICS OPINION OPINION 00-2 (Reconsideration) January 21, 2005 Advisory ethics opinions are not binding. A lawyer may participate in a settlement agreement in which the insurance company deposits directly into a client’s financial account only the portion of the settlement proceeds owed to the client, but may not participate in a settlement if the funds deposited directly into the client’s financial account include attorney’s fees, costs and funds to which a third party may have a claim. RPC: 5-1.1(e) OPINIONS: 00-2, 02-4 The Committee has reconsidered Opinion 00-2 which discourages lawyers from being involved in settlement agreements in which an insurance company places funds directly into an account in a client’s name instead of sending the lawyer a check which is then deposited into the lawyer’s trust account. Opinion 00-2 concludes that this type of arrangement, sometimes known as a “Safe Haven Account” or “FUNDaccount,” prevents a lawyer from fulfilling his or her ethical obligations to third parties. See Rule 5-1.1 and Comment, Rules Regulating The Florida Bar. Additionally, the Committee was concerned about “reducing available funds that otherwise would be used to assist in the administration of justice through participation in the Supreme Court approved IOTA program.” The Committee is concerned that Opinion 00-2 might be interpreted as mandating limitations on the client’s ability to direct payments of the client’s share of settlement funds into specific financial accounts or to designated third party recipients without having those funds placed first in a lawyer’s trust account. The client has wide discretion in directing the manner in which the monies owed to the client are distributed provided, however, that the client may not direct payment of funds in a manner intended to avoid the client’s legal obligation to pay the client’s lawyers or to pay debts owed to third parties. The Committee believes that the concerns expressed in Opinion 00-2 can be avoided in a settlement where the only funds going directly from the insurance company into a client’s financial account or to another recipient designated by the client are monies owed to the client and the insurance company issues a separate check to the attorney for the remaining balance, including attorney’s fees, any applicable costs, and amounts owed to third parties which are subject to lien or other valid legal claim that a lawyer is obligated to protect. See Florida Ethics Opinion 02-4. The attorney would then deposit these funds into his or her attorney trust account and distribute the funds in accordance with the attorney’s ethical obligations. This agreement gives a lawyer control over that portion of settlement proceeds covering fees, costs, and amounts to which third parties may have valid legal claims that a lawyer is obligated to protect. This permits the lawyer to fulfill his or her ethical duties under Rule 5-1.1 and Comment, Rules Regulating The Florida Bar. It also allows for the collection of interest on these funds, through placement in an IOTA account when required by Rule 5-1.1(e). In conclusion, a lawyer may participate in an arrangement where an insurance company pays only that portion of the settlement proceeds owed directly to the client into a client’s financial account or to another recipient designated by the client. As stated in Opinion 00-2, however, a lawyer should not participate in a settlement if the funds deposited into the client’s account include the attorney’s fees, costs and funds to which a third party may have a claim.