Can a real estate lawyer also act as a title insurance agent and keep the title insurance commissions?

Plain-English summary

Two inquiries asked whether a lawyer who represents clients in real estate transactions may also serve as a title insurance agent, retaining a commission or marking up title-search support charges, and whether doing so violates the fee-reasonableness rule (Rule 1.5), the fee-sharing rule (Rule 5.4), or the misconduct rule (Rule 8.4) given statutes that penalize referral fees for title business.

The opinion concluded that, because the Rules no longer prohibit a lawyer from engaging in a second profession or business (even from the same office), a lawyer functioning only as a title insurance agent is not governed by Rules 1.5 and 5.4 as to the fixing or division of title insurance payments, and the payment of title-search support charges is not barred by Rule 5.4. It concluded it is irrelevant whether the title insurer is "bar-related." Drawing on prior dual-profession opinions (85-3, 89-14, 90-16, 90-32), it concluded that title insurance services are not necessarily legal services and are not governed by the Rules unless and until the insurance customer is or becomes a legal client.

The opinion concluded that the usual concerns about a lawyer doing business with clients still apply. When the lawyer does title insurance business with a legal client, the client's consent after full disclosure is required under Rules 1.7(b) and 1.8(a), and the lawyer must observe the rules on confidentiality, professional independence, advertising, and solicitation (Rule 7.3, per Opinion 84-1). It also concluded that when the lawyer acts as both attorney and title agent, Rule 1.5's reasonableness requirement applies to all money received regardless of source, and that the lawyer must comply with the Illinois Title Insurance Act and RESPA, since a statutory violation amounting to a crime could violate Rule 8.4(a)(2), (3), or (4).

Currency note

This opinion was issued in 1994, before Illinois adopted the 2010 Illinois Rules of Professional Conduct. The ISBA Board of Governors affirmed the opinion in January 2010 as generally consistent with the 2010 Rules (referring to Rules 1.5, 1.7, 1.8(a), 5.4, 7.3, and 8.4(a)), while noting the specific standards referenced may differ from the 2010 Rules. Subsequent rule amendments or later opinions may have changed the analysis. Verify against current rules before relying on any specific rule or requirement mentioned here.

Common questions

Q: Can a lawyer run a title insurance agency alongside a law practice?

A: The opinion concluded yes. The Rules no longer bar a lawyer from a second profession or business, even from the same office, so long as the law practice complies with the Rules.

Q: Does Rule 5.4's fee-sharing bar reach title insurance commissions?

A: The opinion concluded no, as to the title insurance payments themselves. When the lawyer functions only as a title agent, Rules 1.5 and 5.4 do not restrict the fixing or division of those payments, and paying for title-search support is not barred.

Q: What does the lawyer have to do when selling title insurance to a legal client?

A: The opinion concluded the lawyer must obtain the client's consent after full disclosure of the title insurance arrangements under Rules 1.7(b) and 1.8(a), and take care to avoid improper solicitation under Rule 7.3.

Q: Can a statutory violation in the title business become an ethics violation?

A: The opinion concluded yes. The lawyer must comply with the Illinois Title Insurance Act and RESPA, and a statutory violation amounting to a crime could also violate Rule 8.4(a)(2), (3), or (4).

Background and rules framework

The opinion interpreted Rule 1.5 (reasonable fees; Model Rule 1.5), Rule 1.7(b) and Rule 1.8(a) (conflicts and business transactions with clients; Model Rules 1.7 and 1.8), Rule 5.4 (sharing fees with nonlawyers and professional independence; Model Rule 5.4), Rule 7.3 (solicitation; Model Rule 7.3), and Rule 8.4(a) (misconduct, including crimes; Model Rule 8.4). It applied the Illinois Title Insurance Act and RESPA.

Citations and references

Rules of Professional Conduct:

• Model Rule 1.5 (fees) / Illinois Rule 1.5
• Model Rule 1.7 (conflict of interest: current clients) / Illinois Rule 1.7(b)
• Model Rule 1.8 (business transactions with clients) / Illinois Rule 1.8(a)
• Model Rule 5.4 (professional independence; fee sharing) / Illinois Rule 5.4
• Model Rule 7.3 (solicitation of clients) / Illinois Rule 7.3
• Model Rule 8.4 (misconduct) / Illinois Rule 8.4(a)

Other opinions cited:

• ISBA Opinions 84-1, 85-3, 89-14, 90-16, and 90-32

See also

• ISBA Ethics Op. 96-04: Practicing Under a Nonlawyer-Owned Corporate Name
• CA COPRAC Op. 1995-141: Rendering Nonlegal Services to a Client
• ABA Formal Op. 464: Fee Division With Nonlawyers

Source

• Landing page: https://www.isba.org/ethics/opinions/9301