Can a lawyer refer clients to an insurance carrier and quietly collect a referral fee from the carrier when a policy is sold?

Plain-English summary

A lawyer asked whether he could recommend persons to insurance carriers, describe a proposed insurance contract, and accept what amounted to a referral fee from the insurance company for each contract sold to those he recommended. As described, the lawyer would act as a contact man, furnishing information about prospective policyholders, who ordinarily would not know the lawyer was being paid for the referral.

The committee assumed the procedure would, at least in many cases, involve a lawyer referring existing clients, or persons reposing confidence or trust in him, to an insurance carrier so that the carrier, on a sale, would compensate the lawyer without the client's knowledge. Citing its prior opinions on lawyers and life insurance sales (64-33, 64-70, the withdrawn 67-10, and 67-11), the committee concluded without hesitation that the arrangement was completely inconsistent with the duty a lawyer owes the client, was devoid of fairness and candor, and was to be condemned as a departure from ethical standards.

Currency note

The Florida Bar later modified this opinion. Opinion 70-13 added the requirement that the client receive the benefit of the referral fee, or that the lawyer credit the client with the fee against the lawyer's own fees. This opinion was issued in October 1967, before The Florida Bar's adoption of the 2006 revisions to the Rules of Professional Conduct. It applied the former Canons 34 and 35 on division of fees and lay intermediaries. Conflicts arising from a lawyer's own financial interest, and business arrangements affecting a client, are now addressed by Rule 4-1.7 and Rule 4-1.8 of the Rules Regulating The Florida Bar (Model Rules 1.7 and 1.8). Treat this page as historical context, not current guidance. Verify against the current rules before relying on any specific requirement mentioned here. Cited Opinion 67-10 has since been withdrawn.

Common questions

Q: Can a lawyer take a referral fee from an insurer for sending clients its way?

A: Under this opinion, not without the client's knowledge. The committee condemned a lawyer being secretly paid by an insurance carrier for referring clients as inconsistent with the duty owed to the client.

Q: How did Opinion 70-13 change this?

A: Opinion 70-13 modified 67-25 to require that the client receive the benefit of the referral fee, or that the lawyer credit the fee against the lawyer's own charges to the client.

Q: What was wrong with the original arrangement?

A: The clients ordinarily would not know the lawyer was profiting from the referral, which the committee found devoid of fairness and candor and inconsistent with the lawyer's duty to the client.

Background and rules framework

The opinion applied the former Canons 34 (division of fees) and 35 (lay intermediaries and the independence of the lawyer's professional judgment). A lawyer's undisclosed financial interest in a transaction the lawyer recommends to a client is now addressed by the conflict-of-interest rules: Rule 4-1.7 (a lawyer's own interest materially limiting the representation) and Rule 4-1.8 (business transactions with a client and related arrangements) of the Rules Regulating The Florida Bar; the Model Rule analogues are Rules 1.7 and 1.8.

Citations and references

Rules of Professional Conduct:

• Canon 34 [Canons of Professional Ethics; division of fees]
• Canon 35 [Canons of Professional Ethics; intermediaries]

Other opinions cited:

• Florida Opinions 64-33, 64-70, 67-10 (since withdrawn), 67-11
• Florida Opinion 70-13 (later modifying this opinion)

See also

• FL Bar Ethics Op. 70-13: Finders Fee on Client Investments
• FL Bar Ethics Op. 72-6: Recurring Referrals From an Insurance Agent

Source

• Landing page: https://www.floridabar.org/etopinions/etopinion-67-25/
• Original PDF: https://www-media.floridabar.org/uploads/2017/04/FL-Bar-Ethics-Op-67-25-1.pdf

Original opinion text

Reproduced from the official source for research purposes. The linked source is authoritative.

FLORIDA BAR ETHICS OPINION
OPINION 67-25
October 20, 1967
Advisory ethics opinions are not binding.
An attorney may not refer clients to an insurance carrier to procure insurance and thereafter without knowledge of the client be compensated by the carrier upon a sale of insurance.
Note: This opinion was modified by opinion 70-13, which adds the requirement that the client receive the benefit of the referral fee or that the attorney credit the client with the fee against the attorney's fees.
Canons: 34, 35
Opinions: 64-33, 64-70, 67-10, 67-11
Chairman MacDonald stated the opinion of the committee:
A member of The Florida Bar poses the following inquiry:
May an attorney in Florida recommend persons to insurance carriers and simultaneously describe in a brief form a proposed insurance contract with the knowledge that the insurance company is to pay what amounts to a referral fee for each contract actually sold to those recommended?
This proposal is such that the attorney involved would write a letter of recommendation, although he would not recommend the company or the program. He would be a contact man and would furnish sufficient information about prospective policy holders to the company.
The prospective policy holders, to whom the insurance company was introduced, would not be aware, ordinarily, that the attorney was making money from the referral.
The precise nature of the recommendation and proposal are not clearly stated. However, it is our assumption that at least in a significant number of instances the procedure outlined would amount to an attorney referring existing clients, or persons reposing confidence or trust in him, to an insurance carrier for the purpose of procuring insurance with the result that without the knowledge of the client the insurance company upon a sale would compensate the lawyer for his referral.
We have previously discussed the relationships involving life insurance sales and attorneys in a number of opinions, including our Opinions 64-33, 64-70, 67-10 [since withdrawn] and 67-11. In light of these opinions we have no hesitancy in concluding that the arrangement described is completely inconsistent with the duty owed by a lawyer to the client, is devoid of fairness and candor, and is to be condemned as a departure from the ethical standards expected of a lawyer.