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OBA Ethics Counsel

Ethics Opinion No. 306

Adopted December 18, 1992

INQUIRY

Is it per se unreasonable for an attorney to take as a fee a percentage of the client's own med-pay when the insurance company has not denied coverage?

OPINION

Further inquiry has developed that the issue involved is a practice of treating payments made under the "medical payments" provision of a client's own insurance policy as included within the amount "recovered" for the purposes of contingent fee contracts providing for the lawyer to receive a certain percentage of "amounts recovered." The inquiry apparently assumes that since "the insurance company has not denied coverage," little or no effort on the part of the lawyer would be required to obtain payment of the amount in question.

Because of the limited scope and fact sensitive nature of the issue presented, the Legal Ethics and Unauthorized Practice of Law Committee has elected to respond in the form of an Informal Opinion, subject, however, to its approval for promulgation by the Board of Governors.

Rule 1.5(a) of the Oklahoma Rules of Professional Conduct mandates that "a lawyers fee shall be reasonable," and specifies certain factors to be considered in making such a determination, e.g., "(1) the time and labor required, the novelty and difficulty of the questions involved, and the skill requisite to perform the legal service properly;" and "(8) whether the fee is fixed or contingent." The "contingent" nature of the fee is only one element in determining "reasonableness." Therefore, a contingent percentage which may be appropriate for application against a recovery obtained from a third party (or more realistically, its insurance carrier) would probably be excessive and exorbitant, and hence unreasonable, when applied to medical payments made, without dispute, by the client's own carrier. However, a rule universally forbidding the application of any contingency arrangements to medical payments coverage would be inappropriate, because disputes could arise as to the amounts payable, as well as coverage, which could require the lawyer's services. Therefore, such fee arrangements must be scrutinized in the light of the applicable facts and circumstances. The fact that the contingent fee contract in question might specifically provide for the inclusion of such payments in the percentage calculated would, however, be irrelevant to the determination of whether the resulting fee would in fact be "reasonable."