FLORIDA BAR ETHICS OPINION
July 15, 2000
Advisory ethics opinions are not binding.
An attorney should not participate in a settlement arrangement in which an insurance company pays
the settlement directly into an account in the client’s name. Such an arrangement circumvents the
trust accounting rules, an attorney’s duty to third parties who may have an interest in the settlement
funds, and participation in the IOTA program.
Note: Rule 4-1.15 was significantly amended by the Supreme Court in April 2002. The
substance of the rule is now incorporated into Rule 5-1.1.
4-1.2(d), 4-1.5(f)(5), 4-1.6(c), 4-1.15, 4-8.4(c), 5-1.2(d)
Interest on Trust Accounts: Petition To Amend Rules Regulating The Florida Bar,
538 So.2d 448 (Fla. 1989)
The Professional Ethics Committee has received inquiries regarding the ethical propriety of
an attorney agreeing with an insurance company to accept a settlement payment directly into a
“checking account” for the client. Members of the Florida Bar who have been representing clients
in personal injury claims have been offered proposed settlements that are conditioned on the
following. The attorney would be sent a checkbook from the insurance company. The checks are
for an account established for the client which is similar to an interest bearing checking account
with a name like “FUNDaccount” or “Safe Haven Account.” It appears that the account is
administered by a large financial institution that is acting as an asset custodian for a number of
insurers. The funds are not FDIC insured and there is no limit on the amount of checks which can
be written. Additional funds cannot be deposited into the account by the client, and the account is
closed once it reaches a minimum level. The settlement to the client would include the attorney’s
fees as well as any funds to which a third party may have a claim. It would be the responsibility of
the client to write separate checks to the attorney or other creditors.
The Rules of Professional Conduct have established a number of checks and balances which
help ensure that the interests of the clients, the attorneys, and third party creditors are considered
before the proceeds of a personal injury claim are disbursed. Typically, a settlement check is
deposited into an attorney’s trust account under the IOTA (Interest on Trust Account) program.
The funds are held in an account which is insured by the FDIC or another federal insurer. Prior to
settlement, an attorney or client may have agreed to pay a third party out of the proceeds of the
personal injury claim. Often the agreement is in the form of a letter signed by the attorney which
promises to provide payment to a medical care provider who has treated or is currently treating the
client. The agreement assists the client in obtaining continued medical treatment as well as forebear
a lawsuit to collect past debt. Sometimes a third party has a claim on the settlement funds created
by statutory lien, such as for Medicare or a hospital.
If a dispute arises as to the amount of trust funds that the attorney, client, or third party
creditors may be entitled to, an attorney is ethically required to attempt to resolve the dispute while
maintaining the funds in trust. When matters cannot be resolved informally, the attorney may be
required to present the matter to the court for resolution of the competing claims.
At any point a client or interested third party can request a full accounting of the funds being
maintained in the trust account. Rule 4-1.15, Rules Regulating the Florida Bar. The Bar is also
able to ensure compliance with the Rules Regulating Trust Accounts by performing audits on the
trust accounts whenever good cause exists. Rule 5-1.2(d). In addition, there is a formal accounting
which must be presented to and signed by the client prior to disbursing the settlement funds
whenever there is a recovery in a contingent fee case. Rule 4-1.5(f)(5).
During the pendency of the distribution process, interest generated on the IOTA account is
used to fund programs designed to improve the administration of justice or to expand the delivery of
legal services to the poor. Interest on Trust Accounts: Petition To Amend Rules Regulating The
Florida Bar, 538 So.2d 448 (Fla. 1989).
The conditional settlement proposed by the insurance company has the potential to bypass
the ethical safeguards established by these Rules as well as create a rift between attorney and client,
which may rise to the level of a conflict of interest. The proposal has the added undesirable effect
of reducing available funds that otherwise would be used to assist in the administration of justice
through participation in the Supreme Court approved IOTA program.
When an attorney is offered a settlement which is conditioned as described above, he or she
should advise the client of the offer as well as the attorney’s ethical obligation to third parties under
some circumstances or option1 to place the funds into his trust account pending distribution. If the
client will agree to place the funds into the attorney’s trust account then the attorney can disburse in
accordance with Rule 4-1.15 and Rule 4-1.5(f)(5). A problem arises, however, when the client
refuses to accept placing the funds in trust and wishes to personally control the funds. The attorney
is then duty bound to advise the client and the insurance company that he cannot assist the client in
conduct which would violate the Rules Regulating the Florida Bar. In addition, if third party
creditors have a legal claim to the settlement funds then the attorney would have an obligation to
advise both client and insurer that he cannot engage in conduct which could potentially defraud
third parties. Rule 4-1.2(d) and Rule 4-8.4(c). Should the insurance company and client continue in
the settlement despite the warnings provided by the attorney, the attorney may disclose the
settlement to the third parties to establish a defense to any claim by the third party creditor. Rule 41.6(c). Because of the conflict of interest, the attorney would be required to withdraw from the
The Comment to Rule 4-1.15 provides in pertinent part:
Lawyers often receive funds from third parties from which the lawyer’s fee will
be paid. If there is risk that the client may divert the funds without paying the fee,
the lawyer is not required to remit the portion from which the fee is to be paid.
An attorney should avoid involvement in such an arrangement because of the ethical
considerations discussed above.