A personal injury attorney’s job is not complete after a settlement or verdict is reached.  In fact, reaching a settlement or verdict is sometimes the easiest part of the case.  Negotiating liens so that a client can keep her settlement/verdict funds has become an ever-increasing burden upon both personal injury attorney and client.

Attorneys must understand the ethical issues involved when negotiating liens and distributing settlement/verdict funds.  Clients should understand that their attorney is doing his best to assure maximum recovery in compliance with his ethical obligations.

The following is a summary of Arizona ethical rules, and law interpreting those rules, that typically arise in lien situations:

• • Arizona Ethics Rule 1.15 – Safekeeping Property

 

• Arizona Bar Ethics Opinions

Opinion No. 88-02 – January 11, 1988

Opinion No. 88-06 – July 5, 1988

Ethics 97-02: Personal Injury; Settlements; Creditors of Client

Ethics 98-06: Liens, Creditors of Clients; Client Funds and Property; Settlements

Ethics 03-05: Conflicts of Interest; Settlements; Creditors of Client; Indemnify Releasee; Liens

• • In re Augenstein

, 177 Ariz. 581, 870 P.2d 399 (1994) (regarding failure to notify third party of settlement and satisfy lien executed on behalf of client).

• • In re Burns

, 139 Ariz. 487, 679 P.2d 510 (1984) (regarding failure to honor lien of third party).

• South Carolina Bar Ethics Opinion 05-08 – 2005 WL 1123351 (requiring attorney to hold lien funds in trust when attorney has actual notice of lien, regardless of whether client instructs attorney not to pay lien)

• Connecticut Bar Ethics Opinion 00-13 – 2000 WL 1370795 (requiring attorney to protect lien holder’s rights when the lien is “established conclusively”)

• Connecticut Bar Ethics Opinion 98-13 – 2000 WL 993683 (absent “actual knowledge” of lien, there is no need to protect interests of lien holder)

• Connecticut Bar Ethics Opinion 95-20 – 1995 WL 389639 (lawyer has no duty to seek out potential lien claimants)

• South Carolina Bar Ethics Opinion 94-20 – 1994 WL 928296 (a lawyer who knows his or her client has made a valid assignment of litigation proceeds to a medical care provider may not ethically ignore the assignee’s rights and pay the assigned funds to the assignor-client)

• South Carolina Bar Ethics Opinion 93-31 – 1993 WL 928278 (a lawyer does not have an affirmative duty to put health insurer on notice of a tort action. If the health insurer asserts a subrogation right, the lawyer needs to analyze the claim in light of the facts and advise the client as to the best course of action under the circumstances)

• Alaska Bar Ethics Opinion 05-08 – 2008 WL 4354841 (the subrogated insurer’s right to receive proceeds from the insured plaintiff’s recovery in a lawsuit does not make the insurer a “client” of the lawyer under the ethics rules)

• Connecticut Bar Ethics Opinion 99-16 – 1999 WL 958022 (lawyer has duty to protect lien holder’s interests when “actual notice” of lien is obtained)

• Wisconsin Lawyer March 2009 – E-09-01: Third Party Lien on Settlement Proceeds (regarding a lawyer’s responsibilities when a client gives a third party a lien on settlement proceeds).

Should you have any questions about how to handle liens in personal injury cases, please contact Palumbo Wolfe partner,Scott I. Palumbo, at 602-265-5777.