You have asked us how to handle a situation in which, in a personal injury case taken on a contingent fee, your client refuses to sign a Schedule of Distribution because she disputes the amount of the bills submitted by medical care providers. You stated that the client had signed an assignment of benefits and the settlement funds are now being held by you in escrow. The assignments were requested directly by the medical providers. Your office does not have any referral or representation relationship with these providers.
Rule 1.15(c) of the Rules of Professional Conduct provides that if the lawyer is in possession of property in which both the lawyer and another person claim interest, the property shall be kept separate of their interest, and that the portion in dispute shall be kept separate until resolution.
Our suggestion has been to try to persuade the client to approve distribution by you of the amounts not in dispute, including your percentage fee of the undisputed amount, and to maintain the balance in escrow. You are then permitted to negotiate with the medical care providers on behalf of your client until a compromise is approved by all parties. You should not pay the providers, even if they insist, if the client directs you not to.
If the dispute is not resolved, no mechanism currently exists to force resolution. Accordingly, you might suggest mediation or arbitration of some kind between the client and provider. You would be justified in advising the client that, because you were engaged to handle the accident case only, you are permitted to negotiate a separate fee agreement as to your representation of the client vis-a-vis the provider. In the meantime, you must advise the client that the funds will continue to be held in escrow. Depending upon the amount and length of time to be held, you may wish to utilize an interest bearing account, and may have a duty to do so.
If you also signed the assignment of benefits as counsel and the provider pursues you, a question may arise as to whether you are now put in a conflict position with regard to your own client, under Rule 1.7(b). You may therefore be required to withdraw from the representation of the client in the dispute with the provider unless the subsections of Rule 1.7(b) are complied with.
If there is no assignment but merely your letter of protection to the medical provider, if the client refuses permission to distribute funds directly to that provider, you must release the funds to your client.
If you continue to represent the client in an underinsured motorist claim after settlement with the third party, which you may do, you must reach a separate agreement with the client relative to fees and costs before you withhold any sums from the previous settlement to apply to costs or expenses in the underinsured case.
Keep in mind that Rule 3.3 requires candor toward the tribunal, so that you may not simply submit the medical bills to your adversary and the trier(s) of fact in the underinsured case if you know that your client is disputing the charges.
We trust that the foregoing answers all of your inquiries.