Advisory Opinion:
1915
Year Issued:
2000
RPC(s):
RPC 1.14(a); 1.14(b)(3); 1.4(b)(4); 1.14(c)
Subject:
Use by insurance company lawyers of corporate trust account for deposit of money recovered on behalf of insured client
The inquiring lawyer is employed by an insurance company to pursue subrogation claims against third party tortfeasors. The subrogation actions are brought in the name of the insured and that, in addition to seeking subrogation on behalf of the insurance company, the actions also seek recovery of the insured’s deductible. The lawyer asks if the insurance company staff lawyer may ethically participate in depositing the recoveries directly into corporate accounts, rather than into an IOLTA account.
The committee stated that RPC 1.14(a) requires a lawyer to deposit all funds of a client paid to the lawyer into one or more identifiable interest-bearing trust accounts. RPC 1.14(b)(3) and (4) requires a lawyer to render appropriate accounts to clients for their funds and to promptly pay or deliver them to the client on request.
Thus, a lawyer receiving client funds in the form of subrogation recoveries must deposit the funds into a trust account and may not deposit them to a client corporate account. In addition, where as here, the lawyer appears to be representing more than one client, i.e., the insurance company and the insured, a lawyer who directly deposits all the funds into the insurer’s general corporate account would breach his or her duty to separately account for and deliver client funds under RPC 1.14(b)(3) and (4).
Whether the funds must be deposited into an IOLTA account or into a separate interest-bearing account for a particular client or clients is governed by RPC 1.14(c) and essentially depends on whether the account is capable of generating net interest for the client.
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