You have asked the Professional Guidance Committee for an opinion in connection with the following facts: You are the second attorney to represent a plaintiff in connection with her automobile accident in March 1990. You have been asked to represent her with respect to her underinsured motorist claim. She has $100,000.00 in coverage for medical bills (PIP). Her first attorney settled the third party claim arising out of the March 1990 accident for $15,000.00. The first attorney sent plaintiff a distribution sheet showing that he had escrowed $3500.00 to be paid to two different medical providers. Additionally, the distribution sheet showed that $975.00 had been deducted from the client's share of the settlement for payment to yet another medical provider.
You recently received a check for $6,000.00 from the first attorney, who had not only escrowed the $3500.00 shown on the distribution sheet but had also escrowed an additional $2,500.00 from your client's share of the settlement. The distribution did not call for that deduction nor do you have any explanation from the first attorney as to why this sum was escrowed.
Further, you have informed us that it is your understanding of the law that under 75 Pa. C.S. Section 1797(a), healthcare providers may not bill the insured directly; providers must accept whatever amount the insurer pays them for medical services and they are not permitted to go back to the insured (here your client) to make up the difference between their bills and what the insurance company pays.
Your client has informed you that she would like the $6,000.00, and further that she was not made aware of the provision of the Motor Vehicle Insurance Law which exempts her from paying healthcare providers. Last, you have found nothing in the file which would constitute a guarantee or a protection letter or any other kind of documentation that would permit healthcare providers to reach the settlement fund. However, the first attorney has told you that he has agreed to protect medical providers and wants you to honor that protection. You have asked for an opinion as to how to proceed.
If you are satisfied that both the statute and insurance policy say what you think they say, that is: (1) that the Motor Vehicle Insurance Law states that healthcare providers cannot go back against the insured for any money once paid by the insurance company, and (2) that, in fact, your client has $100,000.00 in PIP coverage, there is certainly no ethical impediment to your turning over the $6,000.00 to your client. In fact, it would seem that this is the course you should follow, since it is the client's money. Once again, this advice would depend entirely on your interpretation of the law and your ability to satisfy yourself that the law says what you think that it says.
The above analysis leaves open the questions of what to do about (1) the first attorney's use of the $975.00 to pay a medical provider before the client came to you1 and (2) the first attorney's withholding of $2,500.00 without accounting for it on the distribution sheet provided to the client. You should look at the Rules of Professional Conduct including, but not limited to Rules 1.15 and 1.5(c).
Rule 1.15, entitled "Safekeeping Property," states:
(a) A lawyer shall hold property of clients or third persons that is in a lawyer's possession in connection with a representation, separate from the lawyer's own property. Funds shall be kept in a separate account maintained in the state where the lawyer's office is situated, or elsewhere with the consent of the client or third person. Other property shall be identified as such and appropriately safeguarded. Complete records of such account funds and other property shall be kept by the lawyer and shall be preserved for a period of five years after termination of the representation.
(b) Upon receiving funds or other property in which a client or third person has an interest, a lawyer shall promptly notify the client or third person. Except as stated in this Rule or otherwise permitted by law or by agreement with the client, a lawyer shall promptly deliver to the client or third person any funds or other property that the client or third person is entitled to receive and, upon request by the client or third person, shall promptly render a full accounting regarding such property.
Rule 1.5(c), part of the Rule entitled "Fees," states:
(c) A fee may be contingent on the outcome of the matter for which the service is rendered, except in a matter in which a contingent fee is prohibited by paragraph (d) or other law. A contingent fee agreement shall be in writing and shall state the method by which the fee is to be determined, including the percentage or percentages that shall accrue to the lawyer in the event of settlement, trial or appeal, litigation and other expenses to be deducted from the recovery, and whether such expenses are to be deducted before or after the contingent fee matter, the lawyer shall provide the client with a written statement stating the outcome of the matter and, if there is a recovery, showing the remittance to the client and the method of its determination.
It is not within the scope of this committee's mandate to comment on substantive law, and therefore, we must leave it to you to determine if there has been a violation of substantive law.
Assuming that you have decided the first attorney has violated the Rules of Professional Conduct or that any other substantive laws have been violated, then depending on your assessment of the severity of the violation, you should refer to Rule 8.3(a) which states:
(a) A lawyer having knowledge that another lawyer has committed a violation of the Rules of Professional Conduct that raises a substantial question as to that lawyer's honesty, trustworthiness or fitness as a lawyer in other respects shall inform the appropriate professional authority.
Again, if you determine that there are violations of the rules or any laws, and that their severity is of a nature that warrants action on your part, under Rule 8.3 you must proceed to inform the proper authorities.