Can a group legal services plan collect a legal fee for handling a workers' compensation case for one of its members?

Plain-English summary

The committee was asked whether a group legal service plan could accept a legal fee for handling a workers' compensation case, specifically whether it could file for a fee in total-disability cases where the claimant's award did not diminish the monthly benefits. It answered no. The committee noted at the outset that the fee paid to the attorney in these cases could create a claim against the claimant's estate for the amount of fees paid in advance.

The committee relied on SCR 3.475(2)(c), which provides that the group, its agents, or any member may not directly or indirectly derive a profit from, or receive any part of, the consideration paid to a member for legal services under the arrangement; the same rule is reflected in DR 2-103(D)(5)(c). Because prepayment of these fees would likely create a debt for the claimant's estate, the group would in effect be receiving part of the consideration paid to the member, violating SCR 3.475(2)(c). The committee acknowledged the fee created only a potential debt against the estate, but concluded that until it was determined the claim was not valid against the estate, filing for these fees would violate SCR 3.475; it stated that once the repayment question was resolved, the issue could be resubmitted for reconsideration.

Currency note

This opinion was issued in 1978 under Kentucky's former Code of Professional Responsibility (in effect 1971 to 1990), before the Kentucky Bar Association's 1990 adoption of the Rules of Professional Conduct (SCR 3.130) and the substantial 2009 revisions to those rules. Subsequent rule amendments or later opinions may have changed the analysis. Treat this page as historical context, not current guidance. Verify against the current rules before relying on any specific rule, deadline, or requirement mentioned here.

Common questions

Q: Can a group legal services plan collect a fee for a member's workers' compensation case?

A: Not in the circumstances presented. The committee concluded the plan could not file for the fee where it would receive part of the consideration paid for legal services, contrary to SCR 3.475(2)(c).

Q: What was the specific concern with the prepaid fee?

A: That the advanced fee would likely create a debt against the claimant's estate, so the group would effectively receive part of the consideration paid to the lawyer.

Q: Was the conclusion final?

A: The committee left the door open: once the question of repayment of attorney fees by the claimant's estate was decided, the issue could be resubmitted for reconsideration.

Background and rules framework

The opinion applies SCR 3.475(2)(c) and DR 2-103(D)(5)(c) of the former scheme, which barred a group legal services plan from profiting from or receiving part of the consideration paid for legal services. The modern analogs are Model Rule 5.4 (a lawyer's professional independence, including limits on sharing fees) and Model Rule 7.3 (solicitation and prepaid or group legal service plans).

Citations and references

Rules of Professional Conduct:

• SCR 3.475(2)(c) and DR 2-103(D)(5)(c) (group legal service plans); modern analogs Model Rules 5.4 and 7.3

See also

• KBA Ethics Op. E-231: Legal Services Plan Membership Decal
• KBA Ethics Op. E-201: Legal Aid Bankruptcy Referrals

Source

• Landing page: https://kybar.org/For-Members/Rules-Ethics-Information/Ethics-Opinions
• Original PDF: https://kybar.org/Portals/0/Admin/Ethics%20Opinions/KBA_E-188.pdf

Original opinion text

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

KENTUCKY BAR ASSOCIATION
Ethics Opinion KBA E-188
Issued: September 1978

This opinion was decided under the Code of Professional Responsibility, which was in effect from 1971 to 1990. Lawyers should consult the current version of the Rules of Professional Conduct and Comments, SCR 3.130 (available at http://www.kybar.org), before relying on this opinion.

Question:

May a group legal service plan accept a legal fee for handling a Workmen’s Compensation case?

Answer:

No.

References:

DR 2-103(D)(5)(c); SCR 3.475
OPINION

The Committee is called upon to rule on the right of a group legal service program to file for a fee in those total disability cases where the claimant’s award does not diminish the monthly benefits. Before addressing the question it should be noted that the fee paid to the attorney in these cases may very likely result in a claim against the decedent’s estate for the amount of fees paid in advance.
Under SCR 3.475(2)(c) it clearly stated “The group, its agents or any member thereof does not directly or indirectly derive a profit from or receive any part of the consideration paid to the member of the association for the rendering of legal services under the arrangement.” Since the prepayment of these fees would likely create a debt for the estate of the claimant it would violate SCR 3.475(2)(c) in that the group would be receiving a part of the consideration paid to the member. This rule is also set out in DR 2-103(D)(5)(c).
The Committee realizes that the fee only creates a potential debt against the estate of the claimant, but feels that until such time as it is determined that this is not a valid claim against the estate that the practice of filing for these fees by the group would be in violation of SCR 3.475. We feel that once the question of the repayment of attorney fees by the estate of the claimant is decided that this question may properly be resubmitted for reconsideration.

Note to Reader
This ethics opinion has been formally adopted by the Board of Governors of the Kentucky Bar Association under the provisions of Kentucky Supreme Court Rule 3.530 (or its predecessor rule). The Rule provides that formal opinions are advisory only.