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Bar News - August 19, 2011


Morning Mail: Ethics Questions Raised by Insurance Settlements

RE: Ethical Question: "May a Lawyer Agree to Indemnify an Insurance Company as a Condition of Settlement?"

Iím enclosing copy of "Legal Ethics Opinion 1858," promulgated by the Virginia State Bar on March 24, 2011, establishing that: (I) a plaintiffs lawyer may not agree to indemnify a defendant and/or his insurer for any third-party lien claim against settlement proceeds received by the plaintiff; and (2) defense counsel may not ethically require or demand that plaintiffs counsel indemnify the defendant and/or his insurer for any third-party lien claim against settlement proceeds as a condition of settlement.

The opinion notes that every state which has considered this issue has found that it violates multiple rules of professional conduct for the plaintiffís lawyer to agree to indemnify the defendantís insurer against debts that are owed by the plaintiff or to be paid from the settlement proceeds. In addition, those states which specifically address the role of the defendantís lawyer in such transactions uniformly have found that it is unethical for the defendantís lawyer to draft, propose or participate in an agreement that contains such an indemnification provision.

These kinds of requested and/or demanded indemnification provisions are becoming frequent, and often are not assessed until after a case has been settled at mediation or through direct negotiations.

Under separate cover, per copy enclosed, I have requested a Formal Opinion on the issues from the New Hampshire Ethics Committee.

David Nixon
Manchester

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