You have asked for an opinion on the following facts. You represent a party who was involved in an automobile accident with an uninsured motorist. Your client was insured, and had uninsured motorist coverage. He did not carry collision insurance but did sustain damage to his car as well as loss of use of the car. Your client's claim with his insurance company was settled, and a release and trust agreement was signed by your client. That agreement provides that in the event of a recovery by judgment or settlement against the uninsured motorist your client shall reimburse his insurance company to the extent of its payments to him, (less a pro rated share of the cost of securing such judgment or settlement), and that your client shall notify the insurance company of all significant developments in any action taken to secure your client's rights.
Over the past several years, you have made repeated attempts to communicate with the insurance carrier with regard to an action you proposed to and eventually did file on behalf of your client in small claims court. This resulted in a $5,000 judgment on behalf of your client and you have now been contacted by an attorney representing the defendant offering to settle the claim for less than the full judgement amount. You ask how to proceed in this situation.
The Professional Guidance Committee cannot address legal questions. As such, the Committee cannot recommend the dollar amount that you might agree to in order to settle this matter. However there are some ethical issues presented by your situation and these are hereinunder addressed.
Rule of Professional Conduct 1.15(b) provides that:
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.
The Committee recommends that you contact the insurance company by certified, return receipt requested, mail to inform it of the proposed settlement. Use of a "negative option" letter, specifying a certain date which the company must contact you back with any objections to the settlement amount, would be appropriate as you have had difficultly with the company responding to your communications. Once the matter is settled, Rule l.15b would require you to first make a decision as to the legal rights (if any) that the carrier has to the funds. If you decide that the carrier is not entitled to any of the funds then you may distribute the funds to your client. If, on the other hand, you determine that the insurance company does have rights to some or all of the funds, you must so notify both the company and your client of this, and keep the funds in escrow until the respective rights and entitlements of your client and the carrier are resolved.
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