Tennessee Ethics Opinion on Payments to Health Care Providers

My friend Keith Williams posted a comment that asked about the Tennessee ethics opinion that discusses how to handle the issue raised in the proceeding post – how should we handle liens asserted by health care providers when we have not  signed a contract obligating us (as lawyers) to recognize the lien.

There is a Tennessee Ethics Opinion on point.  Here it is:


Inquiry is made concerning the ethical obligations of a lawyer in the handling of settlement proceeds on behalf of a personal injury client when the client objects to the payment of medical expenses.

A lawyer should hold property of others with the care required of a professional fiduciary. Disciplinary Rule 9-102 of the Code of Professional Responsibility requires the lawyer to keep funds of the client in an identifiable bank account, maintain complete records thereon, render  appropriate accounts to the client, and promptly pay and deliver to the client the funds which the  client is entitled to receive. Disciplinary Rule 7-102 of the Code prohibits the lawyer from assisting the client in fraudulent  conduct. DR 7-102(B)(1) specifically requires the attorney to counsel the client against  perpetration of a fraud upon another and, if the client insists on fraudulent conduct, to reveal the  potential fraud to the affected person. The client has no privilege of confidentiality with respect to proposed fraudulent activity. See DR 4-101.

There is no clear ascertainable ethical authority concerning the lawyers ethical duties when there  is a dispute between the client and third-party concerning the right to funds held by the lawyer on  behalf of the client. The Idaho Supreme Court in the case of Bonanza Motors Inc. v. Webb, 104  Idaho 234, 657 P2d 1102 (1983) in a legal issue held that a lawyer must not deliver funds to a  client when the lawyer has notice that a third-party has a superior right to the funds. The lawyer  was found liable in an action by the creditor when the lawyer paid the entire judgment to the  client after having received a copy of an instrument by which the client had assigned part of his  judgment award to a third-party creditor, and provided that the lawyer should pay the creditor  directly when the funds were received.

This ethics opinion holds that a lawyer who has notice that a creditor of the client has a lien or  assignment to the funds held on behalf of the client is ethically obligated to segregate and retain  the disputed funds until the dispute is resolved. Payment of the disputed amount into court for a  resolution of the matter is permissible after the parties have had a reasonable opportunity to  resolve the dispute.

This 16th day of September , 1987.

The point of my earlier post was to point out another way to handle the issue,  but I should have made it clear that the issue was already answered in Tennessee. 

Sorry about that.

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