(Approved April 28, 1995)
This opinion addresses three related issues arising from a lawyer’s employment as a life insurance agent and by a financial planning company.
Issue No. 1: May a lawyer who is also a life insurance agent, in the course of selling life insurance products, suggest the need for estate planning and then perform legal services for the customer, if requested, where the customer initially did not contact the insurance agent for legal advice?
Opinion: (a) A lawyer who is employed for an insurance firm or who works as an insurance agent is restricted from soliciting legal services from insurance customers under Rule 7.3.
(b) A lawyer may sell insurance products to existing legal clients after fulfilling the disclosure and consent requirements of Rule 1.8(a).
Issue No. 2: May an attorney who is an employee of a financial planner perform legal services for the planner’s clients?
Opinion: A lawyer employed as an agent of a financial planner may perform legal services for the planner’s client only when (a) the legal services offered by the lawyer to the client fall outside the scope of the lawyer’s employment responsibilities to the financial planner with respect to that client, (b) the lawyer establishes an independent attorney-client relationship with that person and (c) the lawyer complies with Rules 1.7(b) and 1.8(f) of the Utah Rules of Professional Conduct.
Issue No. 3: May a lawyer, who is also an insurance agent, take referrals from other insurance agents to do legal work for those agents’ customers under the circumstance where every agent has his own territory and the lawyer/insurance agent would be only doing the legal work referred to him and representing those clients on a consent basis between the client and the attorney?
Opinion: A lawyer is permitted to accept referrals from any source and enter into an attorney-client relationship with the referred individual.
Issue No. 1. The Utah Rules of Professional Conduct do not restrict a lawyer from freely advertising for insurance business. A lawyer may also advertise for legal business and perform legal work resulting from such advertising. The lawyer may also accept unsolicited legal employment from customers developed solely from insurance or other business-related advertising.2However, in-person solicitation of legal work from persons who are not legal clients is restricted.
Rule 7.3(a) provides: “A lawyer may not solicit, in-person, professional employment from a prospective client with whom the lawyer has no family or prior professional relationship, when a significant motive for the lawyer’s doing so is the lawyer’s pecuniary gain.” If “professional relationship” means lawyer-client relationship, Rule 7.3 operates to ban direct solicitation by a lawyer of his insurance customers.
The Michigan Standing Committee on Professional and Judicial Ethics, in ruling on a similar question, held that “professional relationship” as used in Rule 7.3 meant a lawyer-client relationship and prohibited such solicitation.3
Neither the original version of Rule 7.3 nor the earlier Model Code provisions of DR 2-103 and DR 2-104 suggested any exception to in-person solicitation based on the existence of a prior non-legal business relationship.4In fact, the American Bar Association has held that under DR 2-103 a lawyer/physician could not solicit a patient for legal work.5
The exceptions found in the Model Code allowed for the lawyer to accept employment from close friends, relatives, former clients, and those whom the lawyer reasonably believes to be clients.6
The official commentary to Rule 7.3 does not suggest that the rule is any more expansive than its predecessor. In fact, Rule 7.3 in this regard may be more restrictive than its predecessor, as it does not allow direct solicitation of close friends. The context of Rule 7.3 deals with lawyer-client relationship and does not easily lend itself to interpreting “professional relationship” to mean any type of business relationship. The Committee has not found any state that has so interpreted or defined the term “professional relationship.”
Therefore, a lawyer may not solicit legal employment from insurance or investment customers developed through advertising and solicitation relating only to insurance and investment products.7
If a lawyer may not solicit legal business from non-legal-client insurance customers, may he then solicit insurance business from the clients of his law practice? Rule 1.8(a) addresses such business interests and provides, in relevant part, that “A lawyer shall not enter into a business transaction with a client . . . unless . . . (2) The client is given a reasonable opportunity to seek the advice of independent counsel in the transaction; and (3) The client consents in writing thereto.” Nothing in the Rules prohibits a lawyer from soliciting insurance business from clients who respond to his marketing efforts for his law practice, so long as he complies with Rule 1.8.
Michigan has held that, subject to the disclaimer and consent required in Rule 1.8, selling insurance products to existing clients is permitted.8However, the New York State Bar Association in a 1991 opinion held under its version of the Model Code that the opportunity for overreaching or conflict of interest by the lawyer is so great in this circumstance that no meaningful consent by the client can be given.9Nonetheless, we believe the less restrictive interpretation of the Model Rules by Michigan is the appropriate determination of this issue.
We emphasize again that, once a lawyer-client relationship is created, the lawyer is subject to the requirements of disclosure and consent under Rule 1.8(a) when attempting to sell insurance products to his law clients. A lawyer who sells insurance products to his clients must be sensitive to potential conflicts that can arise, for example, when the client cancels his insurance, or when a dispute arises between the insurer and the client/insured. The lawyer will assume a substantial burden of showing that his legal advice (or omission of advice) was free from any bias or conflict of interest created by the dual capacities in which the lawyer acted.10
Also, if both an insurance and law practice are operated from the same office, the lawyer must protect the legal client confidences. In circumstances where separated operations of the legal and non-legal businesses are not maintained, the Rules of Professional Conduct may apply to the ancillary business.11
Issue No. 2: May an attorney who is an employee of a financial planner perform legal services for the planner’s clients?
This question raises several concerns. As a threshold matter, the lawyer may not form a relationship with or otherwise assist in the unauthorized practice of law.12Rule 5.4(b) provides: “A lawyer shall not form a partnership with a nonlawyer if any of the activities of the partnership consist of the practice of law.” Similarly, Rule 5.5(b) specifies: “A lawyer shall not . . . [a]ssist any person in the performance of activity that constitutes the unauthorized practice of law.” To the extent the financial planner offers services that constitute the practice of law, the lawyer would be prohibited from participating with a nonlawyer in such a activities.13This opinion assumes that the financial planner’s services, taken alone, do not constitute the practice of law.
Beyond the unauthorized practice considerations, the primary concern involves the role of the lawyer as an employee of the financial planner. If the lawyer is to represent someone besides the financial planner, the lawyer must exercise independent professional judgment on behalf of that client.14However, as an employee of the financial planner, the lawyer also owes a duty to, and is under the supervision of, the employer. Clearly, the lawyer’s exercise of independent professional judgment on behalf of the private client must not be hampered by or subject to interference from the financial planner as the lawyer’s employer.15
Concerning the legal matters related to the services provided by a financial planner, the client of a lawyer who serves as in-house counsel to the financial planner would, of course, be the financial planner-not the planner’s client. An in-house counsel or other attorney who undertakes to provide legal services to a client of the attorney’s employer must render those services strictly outside of the employer’s services to be provided to that person. In determining whether to undertake any representation, the lawyer would also be bound by the provisions of Rule 1.716and Rule 1.917to determine whether a conflict exists between the lawyer’s employer and any potential or former client.
Furthermore, if the financial planner intends to pay for the legal services to be rendered to the planner’s client, Rule 1.8(f), Conflict of Interest, Prohibited Transactions, must also be carefully considered: “A lawyer shall not accept compensation for representing a client from one other than the client unless: . . . [t]here is no interference with the lawyer’s independence of professional judgment or with the client-lawyer relationship.” A lawyer paid from a source other than the client may render legal services to that client only if a separate lawyer-client relationship is established and if the client is informed and consents to the arrangement.
Whether a lawyer may ethically render legal services to a client of the lawyer’s employer ultimately depends on whether those legal services fall within the scope of the lawyer’s employer-assigned duties that are related to the planner’s services for the client. This is true irrespective of who actually pays for the legal services. Were the scope of the lawyer’s employment with the financial planner to include the performance of legal services to the planner’s client, the independent professional judgment of the lawyer would be impermissibly compromised. In such a situation, the lawyer’s professional judgment could be affected by his own pecuniary interests or those of his employer.18Generally, a “lawyer’s own interest should not be permitted to have an adverse effect on representation of a client.”19
In acting as an employee or agent, the lawyer’s principal client is the planner who gives the lawyer his work and supervises his conduct. The lawyer’s motivation to generate revenue for the planner through the preparation of wills, trusts and other documents on behalf of the planner would not necessarily be consistent with the best interests of the financial planner’s client. In order that the lawyer’s independent professional judgment will not be compromised either by the duties undertaken for the employer or by the method of compensation, the attorney’s services to the financial planner’s client must not be required by the attorney’s employment relationship with the financial planner.20The lawyer must also comply with Rule 1.7(b) of the Utah Rules of Professional Conduct and obtain the consent to representation of the financial planner and the potential client, after full disclosure of the possibilities of limitations upon the representation arising from the employment relationship.
Finally, the lawyer who seeks to represent a planner’s client would be required to establish a meaningful attorney-client relationship with that client before providing legal services. In estate planning, for example, the needs of the client may be unclear-the same client may be a grantor, beneficiary and a fiduciary.21
To explore the options and protect the rights of and explain the responsibilities of the client, the lawyer must have a meaningful relationship with the client. To do so, the attorney must establish an attorney-client relationship by meeting directly with and performing legal services directly for the client. This can only be done in the context of those legal services that are not required of the attorney by the attorney’s employment relationship with the financial planner.
Thus, a lawyer who enters into an employment relationship with a nonlawyer to provide estate-planning or similar services and represents or purports to represent the planner’s client within the scope of services to be provided by the planner cannot maintain the requisite professional independence to the planner’s client. Only where the lawyer has formed a lawyer-client relationship with the planner’s client to perform legal services not required of the lawyer by the lawyer’s employment responsibilities to the financial planner may the lawyer undertake to represent the client. The lawyer must, however, fully comply with Rules 1.7(b) and 1.8(f) of the Utah Rules of Professional Conduct.
Issue No. 3: May a lawyer, who is also an insurance agent, take referrals from other insurance agents to do legal work for those agents’ customers where every agent has his own territory and the lawyer/insurance agent would be only doing the legal work referred to him and representing those clients on a consent basis between the client and the attorney?
No disclosure is necessary where such referrals are made in-house. It would be prudent, however, for the insurance agent to advise the client being referred that he also works for the insurance company as an agent. Obviously, should any conflict arise under Rules 1.7, 1.8 or 1.9 relating to conflicts of interest, the lawyer would be bound by those rules.
Thus, a lawyer is permitted to accept referrals from any source and enter into an attorney-client relationship with the referred individual.
1.Opinion No. 146 was issued on July 29, 1994. Upon further consideration of the opinion, the Committee, sua sponte, determined that the treatment of the analysis and conclusion of Issue No. 2 (“May an attorney who is an employee of a financial planner perform legal services for the planner’s clients?”) was not a model of clarity and could be read as not internally consistent. After reconsidering the matter, the Committee has revised the conclusion and analysis of Issue No. 2 and designated the revised opinion as Opinion No. 146A. Accordingly, this revised opinion replaces and supersedes Opinion No. 146.
2.Ill. Bar Ass’n Comm. on Professional Ethics, Op. No. 90-32 (May 15, 1991), ABA/BNA Lawyers’ Manual on Professional Conduct 1001:3005.
3.”Taking the Rule and commentary as a whole, however, it appears the term ‘professional relationship’ is intended to connote the lawyer-client relationship, and not a mere business relationship. Thus, unless the lawyer had a prior or current lawyer-client relationship with the insurance customer, the lawyer may not offer legal services to the insurance customer in person or by phone.” Mich. Standing Comm. on Professional and Judicial Ethics, Op. No. RI-135 (May 28, 1992), ABA/BNA Lawyers’ Manual on Professional Conduct 1001:4763.
4.DR 2-104(A) provided that a “lawyer who has given in-person unsolicited advice to a lay person that he should obtain counsel or take legal action, shall not accept employment resulting from that advice . . . .”
5.ABA Informal Op., No. 83-1497 (March 1, 1983), ABA/BNA Lawyers’ Manual on Professional Conduct 801:344.
6.Model Code of Professional Responsibility DR 2-104(A)(1).
7.Accord, Ill. Bar Ass’n Comm. on Professional Ethics, Op. No. 90-32 (May 15, 1991), ABA/BNA Lawyers’ Manual on Professional Conduct 1001:3005.
8. Mich. Ethics Op. No. RI-135, supra, note 3.
9.N.Y. State Bar Ass’n, Ethics Op. No. 619 (March 14, 1991), ABA/BNA Lawyers’ Manual on Professional Conduct 1001:6101.
10.See ABA Informal Op. No. 82-1482, ABA/BNA Lawyers’ Manual on Professional Conduct 801:329.
11.See Utah Ethics Advisory Op. No. 30 (Oct. 14, 1976), Utah Ethics Advisory Op. No. 17 (Nov. 28, 1973), and Utah Ethics Advisory Op. No. 5 (Jan. 13, 1972). In addition, the American Bar Association has proposed Model Rule 5.7, “Responsibilities Regarding Law Related Services,” which sets forth circumstances under which a lawyer may be subject to the Rules of Professional Conduct with respect to the provision of law-related services. Proposed Model Rule 5.7 is consistent with Utah Op. Nos. 5, 17 and 30 and ABA Formal Op. No. 328 (June 1972).
12.Utah Rules of Professional Conduct 5.4(b) & 5.5(b).
13.See also ABA Informal Op. No. 82-1482, ABA/BNA Lawyer’s Manual on Professional Conduct 801:329. Further, if the “financial planner” is a corporation, it is precluded from providing services of its in-house attorney to the planner’s client. Utah Code Ann. § 78-51-40 (1992).
14.”In representing a client, a lawyer shall exercise independent professional judgment and render candid legal advice.” Utah Rules of Professional Conduct 2.1.
15.Utah Rules of Professional Conduct 1.7(b). See also Rule 1.7 cmt., Loyalty to a Client: “Loyalty to a client is also impaired when a lawyer cannot consider, recommend or carry out an appropriate course of action for the client because of the lawyer’s other responsibilities or interests.”
16.A lawyer shall not represent a client if the representation of that client may be materially limited by the lawyer’s responsibilities to another client or to a third person or by the lawyer’s own interest, unless: (1) The lawyer reasonably believes the representation will not adversely affect the relationship with the other client; and (2) Each client consents after consultation.
Rule 1.7, Conflict of Interest, General Rule.
17.Rule 1.9 deals with former clients.
18.See N.Y. State Bar Ass’n Ethics Op. No. 536 (June 30, 1981), ABA/BNA Lawyers’ Manual on Professional Conduct 801:6105.
19.Rule 1.7, cmt. The comment goes on to explain:
For example, a lawyer’s need for income should not lead the lawyer to undertake matters that cannot be handled competently and at a reasonable fee. See Rules 1.1 and 1.5. If the priority of a lawyer’s own conduct in a transaction is in serious question, it may be difficult or impossible for the lawyer to give a client detached advice. A lawyer may not allow related business interests to affect representation, for example, by referring clients to an enterprise in which the lawyer has an undisclosed interest.
See also N.Y. State Bar Ass’n, Ethics Op. No. 619, supra note 9; and N.Y. State Bar Ass’n, Ethics Op. No. 516 (Jan. 18, 1980).
20. “A lawyer shall not permit a person who . . . employs, or pays the lawyer to render legal services for another to direct of regulate the lawyer’s professional judgment in rendering such legal services.” Utah Rules of Professional Conduct 5.4(c).
21. Rule 1.7 cmt.