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OBA Ethics Counsel

Ethics Opinion No. 329

2012

Inquiry: In an action for civil damages based on personal injury, and in light of 12 O.S. § 3009.1, affecting evidence admissible at trial related to medical bills, is it ethical for a plaintiff’s attorney to contact a client’s medical providers and offer to prepare on their behalf a medical lien for the client’s medical bills, assuming the client is fully informed and gives permission?

The answer is in the qualified affirmative, with the caveats articulated below.

Title 12 O.S. § 3009.1 became effective November 1, 2011. It provides that in civil actions involving personal injury, the evidence of medical expenses is limited to the actual amounts paid, rather than the amounts billed, unless a medical provider has filed a lien for an amount in excess of the amount actually paid.[1], [2] The question presented is:

Is it ethical for an attorney representing an injured client to contact the client’s medical providers and offer to prepare and file a medical provider lien for the medical expenses, on behalf of the medical provider, assuming the client has been fully informed of the possible effects of the action, and gives consent?

The questioner indicates that the intention is to enable the injured plaintiff to introduce into evidence the full amount of the medical bills, rather than being limited to the amount paid or the Medicare reimbursement rate, as provided by the statute.

There are two (2) distinct ethical issues presented. First, Rule 1.7, Rules of Professional Conduct (R.P.C.) deals with conflicts of interest in representing two (2) separate clients. Secondly, the question contemplates the attorney for the injured party contacting and soliciting the medical providers as potential clients, involving R.P.C.7.2 and 7.3. These will be discussed in turn.

THE IMPLICATIONS OF RULE 1.7; CONFLICTS OF INTEREST

It is apparently the opinion of some attorneys that having admissible evidence of higher actual medical expenses is advantageous to the injured party in both settlement negotiations and at trial. Filing of medical providers’ liens allows damages evidence up to the amount of the lien, rather than being limited to some lesser amount paid, or to some lesser Medicare reimbursement rate.

R.P.C. 1.7, - deals with conflicts of interest with current clients, and provides as follows:

Rule 1.7. Conflict of Interest: Current Clients

(a) Except as provided in paragraph (b), a lawyer shall not represent a client if the representation involves a concurrent conflict of interest. A concurrent conflict of interest exists if:

(1) the representation of one client will be directly adverse to another client; or

(2) there is a significant risk that the representation of one or more clients will be materially limited by the lawyer's responsibilities to another client, a former client or a third person or by a personal interest of the lawyer.

The comments to the rule point out that “concurrent conflicts of interest can arise from the lawyer's responsibilities to another client, a former client or a third person or from the lawyer's own interests.”

The actions contemplated by the inquiry would involve the lawyer in the representation of both the injured client and, at least in a limited manner, the medical providers seeking payment from the injured client. While both parties have a common interest in recovering from the tortfeasor, their interests may diverge on the division of the recovery. The interest of the client in paying his doctors the minimum could conflict with the interest of the providers in collecting the maximum. Thus the representation of one client could “be directly adverse to another client”. Rule 1.7 (a)(1).

There is also the risk that the representation of both clients under these circumstances might be affected by the personal interest of the lawyer, contrary to the provisions of Rule 1.7(a) (2). Medical providers often settle accounts due for less than the billed amount, either because of contractual payment schedules with health insurers, Medicare or Medicaid reimbursement schedules, or in the case of uninsured patients, simply compromising the amount due.

Attendant with the injured insured’s contractual duty to repay his own insurer for recovered medical expenses previously paid by the insurer, the insured’s attorney is normally allowed a proportionate attorney fee to be deducted from such recovered expense reimbursements owed to the insurance company. Medicare allows such attorney fees by statute. However if a medical lien is filed, the lien claimant is entitled to be paid the full amount of the lien from the recovery without reduction for attorney fees or other costs of recovery.[3]

Thus, it is possible that the overall monetary recovery is greater, as is the attorney’s contingent fee, but the client actually puts less or none of the enhanced recovery in her pocket, as two-thirds (2/3) of the medical expense recovery goes to Medicare or Medicaid or to reimburse the insured party’s own insurance company, and one-third (1/3) goes to attorney fees. And where a lien is filed, all of the medical expense recovery may go to the lien claimant without reduction for attorney fees, so that the remaining balance of recovery for the client could be additionally burdened by the proportion of attorney fees attributable to the lien claimant’s share. The attorney and providers are enriched, but the client is not, or not so much, or the client could in some circumstances have a smaller net recovery attributable to the special damages portion of the recovery than if the liens had not been filed.

As a matter of trial and settlement strategy however, many attorneys feel that increased special damages contribute to either enhanced settlement value of a case, or overall enhanced damages, including pain and suffering damages, at trial.

Legally, the injured party owes whatever the injured party owes to the providers. The filing of a Medical Provider Lien would not in and of itself increase the client’s existing contractual liability to the medical provider. And the providers and insurers are entitled to be paid and reimbursed by the tortfeasor. Thus the injured party is not legally disadvantaged because the providers and insurers are paid the full amount billed, and the injured party may in some instances enjoy an enhanced recovery for pain and suffering damages if there is evidence of higher actual expenses.

However, one ethical concern must be whether the attorney for an uninsured injured party, for example, should be negotiating a compromised reduction of the medical indebtedness with the provider for the benefit of the injured party, rather than offering to assist the medical provider in filing a lien for the maximum amount claimed. There is risk the attorney could be accused of, or could be guilty of, simply attempting to enhance her fee at the expense of her client. Thus great care would be required in clearly informing the client of the possible alternative courses of action, and the potential adverse consequences of pursuing such a strategy.

The representation of an injured party, and the representation of that party’s medical providers in the preparation and filing of a Medical Provider’s Lien is a concurrent conflict of interest in which the representation of one client is directly adverse to the other client, as proscribed by Rule 1.7(a)(1). It also presents a significant risk that the representation might be materially limited by, or might appear to be influenced by, the personal interest of the lawyer in enhancing the lawyer’s fee by the contingent share of the recovered medical expenses.

Notwithstanding a concurrent conflict of interest, Rule 1.7 (b) allows representation if:

(1) the lawyer reasonably believes that the lawyer will be able to provide competent and diligent representation to each affected client;
(2) the representation is not prohibited by law;
(3) the representation does not involve the assertion of a claim by one client against another client represented by the lawyer in the same litigation or other proceeding before a tribunal; and
(4) each affected client gives informed consent, confirmed in writing.

With regard to 1.7 (b)(1), once the lien is prepared and filed, the lawyer’s duty to the medical provider will presumably be complete, provided the lawyer has clearly limited the representation to that task only in the written disclosure and conflict waiver signed by the provider client. There should not be a conflict, in that regard at least, with the lawyer’s ongoing representation of the injured client.[4]

There is no statutory prohibition involved; 1.7 (b)(2).

The representation does involve the assertion of a claim by the provider against the injured client, as described at 1.7 (b) (3), but such claim is not being adversely asserted in the course of the personal injury lawsuit, nor presumably, at least at the time of filing the lien, in any other proceeding before any other tribunal.

Lastly, the presentation is ethical if each affected client gives informed consent, confirmed in writing; 1.7 (b)(4).[5]

“Informed consent” and “confirmed in writing” are further defined by R.P.C. 1.0:

(b) “Confirmed in writing”, when used in reference to the informed consent of a person, denotes informed consent that is given in writing by the person or a writing that a lawyer promptly transmits to the person confirming an oral informed consent.

(e) “Informed consent” denotes the agreement by a person to a proposed course of conduct after the lawyer has communicated adequate information and explanation about the material risks of and reasonably available alternatives to the proposed course of conduct.

The lawyer will subject himself to a heavy burden to ensure that both the injured party and all of the medical providers understand the proposed course of conduct. Particularly in the case of the injured client, the attorney should take care to outline, where applicable, the possible risk of increased liability to medical providers, which might have otherwise been settled or compromised for a lesser amount, and any possibility that the client’s “net” share of recovery might be further reduced by bearing the burden of the attorney’s contingent fee computed on the share of recovery for the medical lien holder.[6] And of course the writing should clearly explain to the injured party the risks and uncertainty of the outcome of any litigation, and of any particular trial strategy. The nature of the required disclosures would vary and be determined by the particular facts of each case, whether the injured client was insured or not, or covered by Medicare or Medicaid.

In the case of the medical providers, the written consent should acknowledge the limited nature of the lawyer’s representation of the medical provider, making clear that the lawyer will not further represent the medical provider in any additional fashion against the injured party nor in further protecting the lien or claim or collecting the claim of the medical provider.

All of the disclosures must be confirmed in writing, and should preferably be signed by the injured client and all of the medical providers. The writing should include a specific waiver of the conflict. The written consents should include and make clear the right of any of the parties to revoke the consent at anytime, and to terminate the lawyer’s representation at any time.

CONTACTING PROSPECTIVE CLIENTS; R.P.C. 7.2, 7.3

The question directly asks whether it is ethical for the attorney to contact the client’s medical providers and offer to prepare and file the medical provider lien on behalf of the providers.

Rule 7.3 of the Rules of Professional Conduct provides as follows:

a) A lawyer shall not by in-person, live telephone or real-time electronic contact solicit professional employment from a prospective client when a significant motive for the lawyer's doing so is the lawyer's pecuniary gain, unless the person contacted:
(1) is a lawyer, or
(2) has a family, close personal, or prior professional relationship with the lawyer.
(b) A lawyer shall not solicit professional employment from a prospective client by written, recorded or electronic communication or by in-person, telephone or real-time electronic contact even when not otherwise prohibited by paragraph(a), if:
(1) the prospective client has made known to the lawyer a desire not to be solicited by the lawyer; or
(2) the solicitation involves coercion, duress or harassment.
(c) Every written, recorded or electronic communication from a lawyer soliciting professional employment from a prospective client known to be in need of legal services in a particular matter shall include the words "Advertising Material" on the outside of the envelope, if any, and at the beginning and ending of any recorded or electronic communication, unless the recipient of the communication is a person specified in paragraphs (a)(1) or (a)(2).

It is assumed for the purpose of this opinion that the medical provider to be contacted does not meet either of the exceptions provided at Rule 7.3(a), that is, the provider is not a lawyer, nor in a family, personal or prior professional relationship with the contacting lawyer. It is likewise presumed that the medical providers do not fall within the prohibited categories of Rule 7.3(b), and that the lawyer will not engage in coercion, duress or harassment of the medical providers.

The question then becomes whether the in person, or telephonic, or “real time electronic” contact is significantly motivated by the lawyer’s potential pecuniary gain. The question as presented did not expressly state whether or not the lawyer intended to prepare and file the lien for no charge for professional services,or intended to charge.

However, for the purpose of responding to the question, the Panel not only presumes that the lawyer would perform the service for no charge, the Panel’s opinion is conditioned upon the requirement that the lawyer not charge a fee (other than reimbursement of the filing fee) for the preparation and filing of the lien. The mere act of the lien preparation and filing is thus not a financial motivation at all, significant or otherwise.[7]

As noted, there is some opinion that the statute (12 O.S. § 3009.1) might enable the introduction of evidence of higher damages and thus lead to a higher recovery from the tortfeasor for the injured client. Assuming the attorney is representing the injured client on a contingent fee basis, a higher recovery for the client also results in greater pecuniary gain to the lawyer.

But there are potential circumstances in which the recovery of increased special damages might result in greater payment to the provider, and perhaps an enhanced attorney fee for the attorney, but with less or no net benefit to the insured client. It is unlikely that the precise ultimate benefit for the injured client could be accurately predicted in advance, at the time the solicitation of the medical providers was occurring.

However, it is apparent from the Rule, and from the Comments accompanying Rule 7.3 that the Rule is aimed at protecting the client being solicited, rather than the client already represented.[8]With respect to the client being solicited, the medical provider, the lawyer does not have a motive for pecuniary gain from the medical provider.

The lawyer for the injured client could also ethically solicit the medical providers pursuant to the terms of Rule 7.2 on Advertising, by simply writing a letter. Rule 7.2,(a) provides:

(a) Subject to the requirements of Rules 7.1 and 7.3, a lawyer may advertise services through written, recorded or electronic communication, including public media.

(c) Any communication made pursuant to this rule shall include the name and office address of at least one lawyer or law firm responsible for its content.

Any such letter must of course also include the disclosure required by Rule 7.3(c) that the material is “advertising material”, and must also comply with the terms of Rule 7.1 to insure that the communication is not false or misleading.


[1] 12 OS § 3009.1: A. Upon the trial of any civil case involving personal injury, the actual amounts paid for any doctor bills, hospital bills, ambulance service bills, drug bills and similar bills for expenses incurred in the treatment of the party shall be the amounts admissible at trial, not the amounts billed for expenses incurred in the treatment of the party. If, in addition to evidence of payment, a signed statement acknowledged by the medical provider or an authorized representative that the provider in consideration of the patient’s efforts to collect the funds to pay the provider, will accept the amount paid as full payment of the obligations is also admitted. The statement shall be part of the record as an exhibit but need not be shown to the jury. Provided, if a medical provider has filed a lien in the case for an amount in excess of the amount paid, then bills in excess of the amount paid but not more than the amount of the lien shall be admissible. If no payment has been made, the Medicare reimbursement rates in effect when the personal injury occurred shall be admissible if, in addition to evidence of nonpayment, a signed statement acknowledged by the medical provider or an authorized representative that the provider, in consideration of the patient’s efforts to collect the funds to pay the provider, will accept payment at the Medicare reimbursement rate less cost of recovery as provided in Medicare regulations as full payment of the obligation is also admitted. The statement shall be part of the record as an exhibit but need not be shown to the jury. Provided, if a medical provider has filed a lien in the case for an amount in excess of the Medicare rate, then bills in excess of the amount of the Medicare rate but not more than the amount of the lien shall be admissible.

B. This section shall apply to civil cases involving personal injury filed on or after November 1, 2011.

[2] The Panel noted an apparent punctuation error in the statute. It appears that the period at the end of the first sentence should probably be a comma, and the first two sentences as written actually should be one, paralleling the similar provision with regard to Medicare reimbursement rates appearing later in the statute. However, whether either a period or a comma was intended does not affect the provisions at issue in this inquiry with regard to medical provider liens nor alter the opinion of the Panel.

[3] State ex rel.Dept. of Human Services v. Allstate Insurance Company 1987 OK 91, 744 P.2d 186.

[4] Comment 26 to Rule 1.7 provides, in part:
Relevant factors in determining whether there is significant potential for material limitation include the duration and intimacy of the lawyer's relationship with the client or clients involved, the functions being performed by the lawyer, the likelihood that disagreements will arise and the likely prejudice to the client from the conflict. The question is often one of proximity and degree.

[5] Comment 20 to Rule 1.7 explains in part:
The requirement of a writing does not supplant the need in most cases for the lawyer to talk with the client, to explain the risks and advantages, if any, of representation burdened with a conflict of interest, as well as reasonably available alternatives, and to afford the client a reasonable opportunity to consider the risks and alternatives and to raise questions and concerns. Rather, the writing is required in order to impress upon clients the seriousness of the decision the client is being asked to make and to avoid disputes or ambiguities that might later occur in the absence of a writing.

[6] This particular concern could be obviated by the attorney’s agreement with the injured client to not assess the contingent fee against the portion of the recovery attributable to the providers’ liens.

[7] Though no fee is charged, the lawyer must still recognize that preparation of the lien is the delivery of legal services for the benefit of that client, and not some mere interaction with a potential witness, and creates an attorney-client relationship, with all the attendant requirements of diligence, skill and care, and potential liability.

[8] Comment (1) to Rule7.3 contains the rationale for prohibiting direct personal, telephonic, or electronic contact by a lawyer with a prospective client. The primary purpose of the Rule is to prevent undue pressure by a lawyer upon a lay person who is likely already under stress because of the circumstances giving rise to the need for legal services. In the circumstance under consideration, a hospital business office is not likely to feel pressured, nor to be stressed over a decision whether or not to file a lien. Comment (1) provides:

[1] There is a potential for abuse inherent in direct in-person, live telephone or real-time electronic contact by a lawyer with a prospective client known to need legal services. These forms of contact between a lawyer and a prospective client subject the layperson to the private importuning of the trained advocate in a direct interpersonal encounter. The prospective client, who may already feel overwhelmed by the circumstances giving rise to the need for legal services, may find it difficult fully to evaluate all available alternatives with reasoned judgment and appropriate self-interest in the face of the lawyer's presence and insistence upon being retained immediately. The situation is fraught with the possibility of undue influence, intimidation, and over-reaching.