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Board studies contingency fee rule as it relates to medical liens

Senior Editor Regular News

Board studies contingency fee rule as it relates to medical liens

Senior Editor

A rewriting of the Bar’s contingency fee rule to address the hiring of special attorneys to resolve subrogation and medical lien issues related to personal injury cases has been presented to the Board of Governors.

A special committee reported to the board at its May 28 meeting on the suggested amendments to Rule 4-1.5. The proposal will come back to the board for a vote at its July 23 meeting in Sarasota.

The issue arose from an ethics inquiry from an attorney who wanted to know if referring medical liens to a second attorney, who would be paid on a reverse contingency fee, would violate the contingency fee caps in Rule 4-1.5.

The Board Review Committee on Professional Ethics said if the total fees paid to both attorneys exceeded the limits in the rule, that would cause a problem. But board members were reluctant to endorse that, noting that medical lien resolution has become an increasingly intricate area and bringing in an expert could save the client money, even if the contingency fee limits are exceeded.

That led to the appointment of the special committee, chaired by board member Jay Cohen, to examine the issue. Cohen told the board the panel was recommending adding a new subsection to the rule, as 4-1.5(f)(4)(E).

“In every personal injury and wrongful death case, lawyers face ancillary issues,” Cohen said, which can include not only medical liens, but guardianship matters, estate issues, annuities, and other factors.

“When you deal with these medical liens, most personal injury lawyers have been able, over the years by and large, to handle them on their own,” he added. “Lawyers today still oftentimes handle those matters by themselves without any additional assistance. But the times have changed and the laws have changed. There are now requirements from the federal government, there are Medicare set- asides. It has spawned. . . a group of lawyers who concentrate in lien resolution.”

That, in turn, Cohen said, necessitates a change in the contingency fee rule. The new proposed subsection (E) reads:

“The lawyers shall include in the contract an explanation of the scope of any subrogation or lien resolution services the lawyer will undertake at the conclusion of the primary matter. The lawyer shall not charge additional fees for handling lien resolution services if those additional fees, when combined with the lawyer’s fees for handling the primary claim, would exceed the contingent fee schedule set forth in this subdivision. If extraordinary subrogation or lien resolution services are handled by others outside the primary lawyer’s firm who will charge additional attorney’s fees or costs to the client, these services shall only be provided after obtaining the client’s informed written consent to the additional fees or costs. Any additional fees or costs charged by the other lawyers involved in the subrogation or lien resolution services must separately comply with the provision of Rules 4-1.5(a) through 4-1.5(e), and if the fees are contingent on the outcome of the lien resolution, the lien or subrogation resolution fees on their own must also comply with Rule 4-1.5(f).”

Cohen said the rule allows an expert to be brought in when it will benefit the client, as long as the client agrees and the fee paid to the second lawyer for the lien work does not on its own violate the fee limits in Rule 4-1.5. As written, the rule also prohibits referral fees from being paid, he added.

The proposed comment for the new rule clarifies several related issues, including:

• Lawyers taking the personal injury or wrongful death case must set out in the contract whether subrogation and lien resolution issues will be handled as part of the contingency contract.

• As part of any contingency contract, the attorney has the obligation “to make reasonable efforts to ascertain the existence of any medical liens and subrogation claims, advise the client of their existence, make reasonable efforts to negotiate liens that are negotiable, and disburse the amounts to lien-holders and subrogation claimants” as agreed by the client and third parties.

• Lawyers are not required, unless it’s provided in the underlying contingency contract, to file or defend lawsuits over subrogation issues.

• When liens are so complex they cannot be resolved through standard negotiations typically included in contingency contracts, then it may be in the client’s best interest to bring in a second attorney experienced in those matters.

• The referring attorney cannot accept a referral fee because that “would result in an excessive fee to the original lawyer and would likely exceed the contingent fee schedule.”

• The original attorney must determine if the additional services needed constitute the practice of law, and if they do, must not refer the matter “to a nonlawyer or someone not authorized to provide the services.”

• In wrongful death cases, lawyers often must deal with personal representatives of the estate or with the guardians for minor or disabled clients. Handling such probate and guardianship issues are separate matters for which a fee separate from the contingency fee may be charged.

• Lawyers may also provide other ancillary services, such as estate planning, bankruptcy, financial planning, public benefit planning, and similar work which are not part of the contingency contract. According to the proposed comment, “The personal injury lawyers should clearly indicate in the lawyer’s contract that the lawyer does not intend to undertake such ancillary services, if the lawyer does not intend to do so.”

Cohen said the proposed rule is a win for all parties. It spells out for clients what services their initial lawyer will provide and allows for bringing in experienced lien resolution lawyers to maximize savings for the client when lien issues become complex.

Added Bar President Jesse Diner: “It will really give a bright line to the practitioners out there. It will help the clients and hopefully help the lawyers ethically from a malpractice standpoint.”