MARYLAND STATE BAR ASSOCIATION, INC.
COMMITTEE ON ETHICS
ETHICS DOCKET NO. 2007-12
Attorney’s Obligation Regarding Proceeds of Uninsured Motorist Claim
You ask whether you have an ethical obligation with respect to proceeds received from an Under Insured Motorists (UIM) insurance carrier, based on your discovery, only after completing a client’s settlement with that carrier, of a Maryland statute addressing the benefits payable.
Specifically, you state that, at the time of settlement, you were not aware of the existence of Maryland Code, Insurance Article, §19-513(e), which states:
“Benefits payable under the coverages described in Sections 19-505 and 19-509 of this subtitle shall be reduced to the extent that the recipient has recovered benefits under the workers’ compensation laws of a state or the federal government for which the provider of workers’ compensation benefits has not been reimbursed.”
Though you do not indicate whether or to what extent your client had recovered workers’ compensation benefits, you do state that you had filed a workers’ compensation claim at the same time that you pursued a personal injury claim and put the UIM carrier on notice of a claim. Ultimately, the UIM carrier tenders its policy limits. Though the release signed by your client expressly states that he is “preserving his right to pursue a workers’ compensation claim,” the UIM carrier did not raise the existence of §19-513(e) or request any reduction or elimination of the benefits that it agreed to pay. Having discovered the existence of the code provision after the settlement with the UIM carrier was completed, you now ask whether you have an ethical obligation to “inform [the UIM carrier] that it had a right to assert Section 19-513 and decline [your] client’s UIM claim and/or return [the UIM carrier’s] funds without request” or whether you are obligated to disburse the client’s funds to him in accordance with his instruction.
Your inquiry plainly gives rise to many legal questions and issues regarding the application and construction of the Maryland statutory scheme, as well as case law. This Committee cannot venture to interpret the law or to provide legal advice as to the application or requirements of Maryland law. As far as ethical obligations, the Committee directs you to Maryland Rule 1.15 (d) & (e), which respectively address the safekeeping of property in which a third party has an interest or claims an interest. You must determine for yourself, or secure sound legal advice as to, whether any third party has a valid claim against the funds received . If you determine that such an interest exists, you must abide the directives in Rule 1.15.
Further, in light of the requirements of Rules 3.4 “Fairness to Opposing Party and Counsel” and 4.1 “Truthfulness in Statements to Others,” you should scrutinize your communications and interaction with the UIM carrier to assure yourself that you did not run afoul of those rules. Rule 3.4 (a) prohibits a lawyer from unlawfully obstructing another party’s access to evidence, and 4.1 (a) prohibits a lawyer from knowingly failing to disclose a material fact when disclosure is necessary to avoid assisting a criminal or fraudulent act by a client. If your client received workmen’s compensation benefits (for which the provider was not reimbursed) and such fact is material under Maryland law, then you would have violated Rule 4.1(a) if you had knowingly failed to disclose such fact. Further, you must address and resolve, again perhaps with the aid of legal counsel, whether a present disbursement of the funds to your client would constitute knowing assistance of criminal or fraudulent conduct.
With respect to your inquiry as to whether you are ethically obligated to disburse the funds to your client, we believe that your evaluation of the legal issues and interests set forth above will determine that answer.
As with all inquiries, you can access this Committee’s earlier opinions on the Maryland Bar Association’s website at www.msba.org
We hope the foregoing is responsive to your request.
REFERENCES:
Maryland Rule 1.15
Maryland Rule 3.4
Maryland Rule 4.1
ASSIGNED TO: Patricia M. Weaver
DATE ASSIGNED: November 21, 2006
DATE DISTRIBUTED: March 5, 2007