Opinion 93-6

This Inquiry was submitted to the Committee by a letter dated March 24, 1993, and a supplemental letter dated May 3, 1993. The Inquirer has approximately 20 open matters in which he represents clients who allegedly were injured in automobile accidents. The clients received treatment from a medical facility whose administrator has been indicted for fraudulent billing to insurance carriers. The Inquirer writes that he has conducted investigations to determine the validity of the motor vehicle accidents, and that he is representing those individuals where the Inquirer believes there was no fraud in the occurrence of the accidents.

In the supplemental letter, the Inquirer states that he has met with the majority of the clients, and has found fraudulent billing by medical providers to the clients' first-party insurers. The Inquirer states that the medical facility often overstated the number of physical therapy modalities in bills submitted to the insurers, and describes the most prevalent fraudulent billing as a medical equipment company's submitting bills to the first-party insurers for medical equipment that was never received by the clients. The Inquirer states that he believes his clients did not have knowledge of the fraudulent billing.

The Inquirer apparently is about to engage in settlement discussions with third-party insurance carriers, and proposes submitting settlement packages that omit the fraudulent bills. The Inquirer also requests guidance regarding whether he has any duty to disclose this information to the first-party insurers or to a governmental authority.

1. The Settlement Packages to Third-Party Carriers

Under the facts described above, Rules 4.1(a) and 3.4(a) of the Pennsylvania Rules of Professional Conduct address the Inquirer's ethical obligations with respect to communications with the third-party insurers. Rule 4.1(a) provides that: [I]n the course of representing a client a lawyer shall not knowingly . . . make a false statement of material fact . . . to a third person. . . . The comment to this Rule notes that [m]isrepresentations can . . . occur by failure to act. . . . Rule 3.4(a) provides that a lawyer shall not unlawfully obstruct another party's access to evidence or unlawfully alter, destroy or conceal a document or other material having potential evidentiary value. . . . Although a lawyer generally has no affirmative duty to inform an opposing party of relevant facts, see comment to Rule 4.1, the Inquirer must ensure that any settlement packages he submits to third-party insurers are not rendered misleading through omission of the fraudulent bills, and that the documents regarding these omitted bills are not altered or destroyed. If the pertinent documents are retained and unaltered, and the packages can be prepared in such a way as to be not misleading, there is no ethical requirement to disclose the fraudulent billing to the third-party insurers. Because it has not seen the documents or the proposed settlement packages, the Committee expresses no view regarding whether the packages the Inquirer contemplates actually can be prepared in such a way as to avoid misleading the third-party carriers.

2. Duty of Disclosure to First-Party Insurers and the Government

The Inquirer does not say that he represented or assisted the clients with respect to their claims against their first-party insurers. For purposes of this opinion, therefore, the Committee will assume that the Inquirer was not involved with the preparation or submission of those claims. Under the circumstances outlined by the Inquirer, Rule 1.6 addresses issues of disclosure to the first-party insurers and the government. Rule 1.6(a) provides in pertinent part that, absent the consent of the client after consultation, the Inquirer shall not reveal information relating to the representation. Because the Inquirer has concluded that his clients did not commit a criminal or fraudulent act, Rule 1.6(c)(1) does not permit the Inquirer to disclose the information to the government or first-party insurers without the client's consent.

The Philadelphia Bar Association's Professional Guidance Committee provides, upon request, advice for lawyers facing or anticipating facing ethical dilemmas. Advice is based on the consideration of the facts of the particular inquirer's situation and the Rules of Professional Conduct as promulgated by the Supreme Court of Pennsylvania. The Committee's opinions are advisory only and are based upon the facts set forth. The opinions are not binding upon the Disciplinary Board of the Supreme Court of Pennsylvania or any other Court. They carry only such weight as an appropriate reviewing authority may choose to give it.