RI-135
May 28, 1992
SYLLABUS
A lawyer/insurance agent may sell insurance to law clients provided that ethics rules regarding business transactions with clients, confidentiality, and conflicts of interest are observed.
A lawyer may office share with the lawyer's insurance business, as long as the businesses are segregated, client confidences are protected, and public communications about each business entity are clear and do not create unjustified expectations about the results which can be achieved.
A lawyer/insurance agent may not solicit legal employment in person or by telephone from a current or former insurance customer unless the insurance customer is also a current or former law client of the lawyer.
References: MRPC 1.6, 1.7, 1.8(a), 1.9, 5.3, 7.1, 7.2, 7.3(a), 7.5; RI-5, RI-74; CI-600, CI-614, CI-1065, CI-1203; Shapero v. Kentucky Bar Ass'n, 486 US 466; 108 S Ct 1916; 100 L Ed 2d 475 (1988).
TEXT
A lawyer who is licensed to sell insurance asks several questions about the relationship between the lawyer's law practice and the lawyer's insurance business.
- May the lawyer sell insurance policies to the lawyer's current clients?
- May the law practice and the insurance business be situated in the same office? If the insurance company is wholly owned by lawyers, may the insurance company office share with the law firm?
- May the letterhead of each business indicate the other business?
- May the lawyer offer legal services to insurance customers in person or over the telephone?
The former Michigan Code of Professional Responsibility (MCPR) expressly recognized that lawyers may engage in the practice of law and another profession. See, former MCPR DR 2-102(E). The Committee has previously opined that a lawyer may simultaneously maintain a law practice and engage in another occupation, including the insurance business, provided the lawyer complies with applicable rules. CI-600 and CI-614. See also, ABA Op 328, ABA i82-1482 and i83-1497. The Michigan Rules of Professional Conduct do not expressly address the conduct of engaging in the practice of law and another occupation. However, none of the provisions of the Michigan Rules of Professional Conduct would otherwise prohibit a lawyer from pursuing multiple occupations. RI-5. Nevertheless, practicing dual occupations raises numerous ethics issues.
A lawyer who sells insurance to a law client is engaging in a business transaction with the client and must comply with the provisions of MRPC 1.8(a) which states:
"(a) A lawyer shall not enter into a business transaction with a client or knowingly acquire an ownership, possessory, security, or other pecuniary interest adverse to a client unless:
"(1) the transaction and terms on which the lawyer acquires the interest are fair and reasonable to the client and are fully disclosed and transmitted in writing to the client in a manner that can be reasonably understood by the client;
"(2) the client is given a reasonable opportunity to seek the advice of independent counsel in the transaction; and
"(3) the client consents in writing thereto."
Accordingly, in addition to the other requirements of MRPC 1.8(a), a lawyer's recommendations to a law client with respect to the need for, the amount of, and the cost for, insurance coverage must be fair and reasonable to the client.
A lawyer engaged in another occupation must also take care not to allow the representation of the lawyer's law clients to be materially limited by the lawyer's nonlegal business interests. MRPC 1.7(b). It is foreseeable that, from time to time, disputes may arise between the insurer and client/insured. Given the lawyer's personal interest in maintaining a good business relationship with the insurer coupled with a direct adversity between the insurer and the insured/client, it is doubtful that the lawyer could adequately represent either party to such a dispute. MRPC 1.7(a) and 1.7(b). A material limitation would also occur if the demands of the insurance business prevented the lawyer from devoting the requisite time and attention to the legal matters undertaken by the lawyer. Also, the lawyer might be less zealous in handling a legal matter for a client/insured who decides to cancel the insurance coverage.
"A lawyer who elects to engage in a law related business while providing legal advice to customers of that business will, as a practical matter, have the substantial burden of establishing that any legal advice given has been free of the taint of any bias created by the dual capacities in which the lawyer acted." ABA i82-1482. In accord, CI-1203.
A lawyer may operate an insurance business from a law firm's offices and utilize the same, or different, employees for both the law practice and the insurance business, as long as there is a segregation of the businesses sufficient to protect client confidences and secrets and avoid the misrepresentation that the businesses are combined.
It would be anomalous to allow a lawyer to practice dual professions, but require the lawyer and client to move to different offices depending upon the subject matter of their discussions. A lawyer with dual occupations, however, must ensure that the confidences of the law clients are not compromised by the operation of the nonlegal business. The lawyer must take particular care when a dispute arises between the insurer and the insured not to compromise any confidence belonging to the client/insured. MRPC 1.6(b). Adequate procedures must be in place to guard against the inadvertent disclosure of confidences belonging to the lawyer's law clients. These procedures should include keeping client files and other recordkeeping relating to the legal representation matters separate from the insurance business files. If employees who are assigned to work on the insurance files also have access to the legal representation files, or are otherwise privy to the law clients' matters, the lawyer must adequately train and supervise these insurance employees with respect to the necessity for maintaining client confidences. MRPC 5.3. See also, RI-118.
Business customers of the lawyer/insurance agent who are not law clients might, nevertheless, be considered law clients for purposes of the disqualification rules. This will be the case if the lawyer/insurance agent possesses confidences of the business customer which could be compromised by undertaking a legal matter which is adverse to the business customer.
A lawyer practicing dual professions must recognize that communications between the lawyer and a customer of the nonlegal business who is not a law client, are not protected by the attorney-client privilege. Communications between the lawyer and a law client with respect to business, and not legal matters, might also not be privileged. ABA i82-1482. Whether information is protected by the attorney-client privilege is a legal issue, and the Committee is not authorized to opine on matters of law.
The lawyer may indicate on law firm letterhead, business cards and other forms of legal advertising that the lawyer is a licensed insurance agent, provided such information is truthful and nondeceptive and does not give an unjustified expectation of the results that can be achieved. MRPC 7.1(a) and (c). Although including the lawyer's licensing designation on insurance company letterhead is not untruthful, the designation infers that one who purchases insurance from the company will in some way benefit from the fact that the proprietor is a lawyer, when in fact there is no intention of providing legal services to the customer. Further, a lawyer who participates in assisting a nonlaw business to deliver legal services to customers would be assisting the unauthorized practice of law, in contravention of MRPC 5.5.
A lawyer may send truthful, nondeceptive, targeted direct mail to any person for the purpose of soliciting legal and/or insurance business. MRPC 7.3; Shapero v. Kentucky Bar Ass'n, 486 US 466; 108 S Ct 1916; 100 L Ed 2d 475 (1988); RI-74. Whether legal business may be solicited in person from a business customer is governed by MRPC 7.3(a) which states:
"(a)A lawyer shall not solicit professional employment from a prospective client with whom the lawyer has no family or prior professional relationship when a significant motive for the lawyer's doing so is the lawyer's pecuniary gain. The term 'solicit' includes contact in person, by telephone or telegraph, by letter or other writing, or by other communication directed to a specific recipient, but does not include letters addressed or advertising circulars distributed generally to persons not known to need legal services of the kind provided by the lawyer in a particular matter, but who are so situated that they might in general find such services useful, nor does the term 'solicit' include 'sending truthful and nondeceptive letters to potential clients known to face particular legal problems' as elucidated in Shapero v. Kentucky Bar Ass'n, 486 US 466; 108 S Ct 1916; 100 L Ed 2d 475 (1988)."
The term "professional relationship" is not defined. Taking the Rule and commentary as a whole, however, it appears the term "professional relationship" is intended to connote the lawyer-client relationship, and not a mere business relationship. Thus, unless the lawyer had a prior or current lawyer-client relationship with the insurance customer, the lawyer may not offer legal services to the insurance customer in person or by phone.
Therefore, a lawyer/insurance agent may sell insurance to law clients provided that ethics rules regarding business transactions with clients [MRPC 1.8(a)], confidentiality [MRPC 1.6(b)], and conflicts of interest [MRPC 1.7 and 1.9] are observed.
A lawyer may office share with the lawyer's insurance business, as long as the businesses are segregated, client confidences are protected, and public communications about each business entity are clear and do not create unjustified expectations about the results that can be achieved.
A lawyer/insurance agent may not solicit legal employment in person or by telephone from a current or former insurance customer unless the insurance customer is also a current or former law client of the lawyer.