Can a lawyer supply title insurance policies to a lay-owned company to sell to the public?

Plain-English summary

The inquiring lawyer described a proposed arrangement with John Smith, a longtime title abstracter, who wanted to form a for-profit corporation providing abstracting, escrow, real estate closings, and title insurance. The corporation would offer Lawyers' Title Guaranty Fund insurance written by a Florida attorney who was a Fund member. The attorney would form the corporation but hold no interest in it, would not attend closings or represent the parties (unless they were prior clients), would be paid 50% of his normal title-insurance charge, and would not share the corporation's costs. Smith would deal with the attorney exclusively by contract, would effect delivery of any title policy issued, and both understood the attorney's name had to appear on Fund policies.

The committee said the attorney in essence proposed to provide a lay agency with Fund insurance policies for sale to the public. Setting aside its grave doubts that the Fund would permit its policies to be issued that way, it concluded the facts were clearly violative of Canon 35 (practice of law through intermediaries) and Canon 47 (aiding unauthorized practice of law), and that the attorney could not engage in the proposed arrangement.

Currency note

This opinion was issued in 1969, before The Florida Bar's adoption of the 2006 revisions to the Rules of Professional Conduct. It applied the former Canons 35 and 47. The professional independence of a lawyer and the prohibition on assisting the unauthorized practice of law are now addressed by Rules 4-5.4 and 4-5.5. Treat this page as historical context, not current guidance. Verify against the current rules before relying on any specific requirement mentioned here.

Common questions

Q: Can a lawyer let a lay-owned company sell title insurance the lawyer underwrites?

A: Under this opinion, no. The committee held that supplying a lay agency with Fund title policies for public sale violated the rules against practicing through intermediaries and aiding unauthorized practice.

Q: Did the attorney's lack of ownership in the company save the arrangement?

A: No. Even though the attorney held no interest, did not attend closings, and was paid a percentage of his usual charge, the committee found the structure itself improper.

Background and rules framework

The opinion applied the former Canon 35, on practicing law through intermediaries, and Canon 47, on aiding the unauthorized practice of law. Those subjects are now addressed by Rule 4-5.4 on professional independence and Rule 4-5.5 on the unauthorized practice of law. The Model Rule analogues are Rule 5.4 and Rule 5.5.

Citations and references

Rules of Professional Conduct:

• Canons 35 and 47 [Code of Professional Responsibility; now addressed by Rules 4-5.4 and 4-5.5]

See also

• FL Bar Ethics Op. 70-27: Lending a Name for Collection Letters

Source

• Landing page: https://www.floridabar.org/etopinions/etopinion-69-42/
• Original PDF: https://www-media.floridabar.org/uploads/2017/04/FL-Bar-Ethics-Op-69-42-1.pdf

Original opinion text

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

FLORIDA BAR ETHICS OPINION
OPINION 69-42
November 26, 1969
Advisory ethics opinions are not binding.
An attorney may not provide a lay agency with Lawyers' Title Guaranty Fund insurance policies for sale to the public.
Canons: 35 and 47
Chairman MacDonald stated the opinion of the committee:
A member of The Florida Bar poses the following question with reference to his own proposed conduct:
John Smith has been a qualified abstracter of titles for many years. Having worked for a title insurance company, also for a lengthy period, he is extremely familiar with and has handled innumerable real estate closings for the company. Smith desires to form a corporation for profit and the business of the corporation is to provide abstracting, escrow services, real estate closings and title insurance. He proposes to provide Lawyers' Title Guaranty Fund insurance written by a Florida attorney who is a member of the Fund. The attorney will form Smith's corporation but will have no interest therein of whatsoever nature or description. The attorney will not be present at any of the closings nor will he represent any of the parties unless they were his clients previous to the proposed transaction. Remuneration for the attorney would be fifty per cent (50%) of the amount normally charged by the attorney to other persons for like title insurance and underwritten by the Fund. The attorney would not be responsible nor would he share in any of the costs and expenses of Smith's operation. Smith would deal with the attorney exclusively and on a contractual basis for a stipulated period of time. Upon issuance of any title policy by the attorney, Smith, and not the attorney, would effect its delivery. Both Smith and the attorney are aware that the attorney's name must appear on any of the Fund policies.
In essence, the attorney proposes to provide a lay agency Lawyers' Title Guaranty Fund insurance policies for its sale to the public. Laying aside our grave doubts that the Lawyers' Title Guaranty Fund can or would permit its policies to be so issued by its members, we have no hesitancy in concluding that the particular facts outlined are clearly violative of Canons 35 [practice of law through intermediaries] and 47 [aiding unauthorized practice of law] and that the attorney may not engage in the proposed arrangement with the prospective title insurance seller.