Advisory Opinion: 1279

Year Issued: 1989

RPC(s): RPC 1.7; 1.8(f)

Subject: Insurance defense; target budget fee system in which law firm receives bonus for cases under budget

[The lawyer proposed a target budget system for insurance defense claims, where the law firm would receive a bonus for cases coming in under budget, but would not forfeit fees for cases over budget. The system would not apply to certain cases, including if there was a reservation of rights by the insurance company or a claim exceeding policy limits.] The Committee reviewed your inquiry concerning your proposed system for handling insurance defense cases, involving a target budget for each claim. Based upon the facts as submitted in your proposal, the Committee was of the opinion that, as set out, the proposal raises no violations of the Rules of Professional Conduct, so long as you comply with RPC 1.8(f), regarding compensation from third parties.

Advisory Opinions are provided for the education of the Bar and reflect the opinion of the Committee on Professional Ethics (CPE) or its predecessors. Advisory Opinions are provided pursuant to the authorization granted by the Board of Governors, but are not individually approved by the Board and do not reflect the official position of the Bar association. Laws other than the Washington State Rules of Professional Conduct may apply to the inquiry. The Committee's answer does not include or opine about any other applicable law other than the meaning of the Rules of Professional Conduct.