Can a lawyer act as both attorney and title insurance agent for a client, and keep the insurance sales commission on top of charging for the title search?

Plain-English summary

The Commission was asked whether Bar Rule 3 is violated where an attorney charges a client for a title search and also, acting as agent for a title insurance company, charges a premium for a title insurance policy, with part of the premium rebated by the insurer to the attorney-agent, and where a substantial portion of the premium reflects the cost of the title work. The Commission addressed both the propriety of the dual role and the handling of the commission.

On the dual role, the Commission noted that Rules 3.4(c) and (d) largely restate former DR 5-105(B), which permitted multiple employment consented to after full disclosure, so Rule 3.4 does not absolutely prohibit the attorney-agent arrangement. It emphasized, however, Rule 3.4(a), which has no Code counterpart and mandates complete disclosure of any adverse interest; under the Reporter's Notes, the duty extends to all facts that could possibly be relevant, with relevance measured by the client's judgment of the wisdom of retention. The Commission therefore required complete and full disclosure of the details of the financial relationship between the attorney-agent and the insurer, including the formula by which the lawyer-agent is paid.

On the commission, the Commission held that the lawyer must credit it to the client where the work done for the client consists basically of the same services rendered to the title insurance company. Under Rule 3.3(a), keeping the sales commission in that circumstance would be an excessive fee; the Commission noted New York State Bar Opinions 320 and 351 reached a similar result, though the Commission rested only on the view that there is no real distinction between the fee charged for title work and the fee charged as a sales commission, not on agency-law duty to account.

The Commission limited the credit requirement to situations where the legal fee and the placement of the policy are substantially part of the same transaction. It gave a contrasting example: if an attorney examines title for a purchaser and bills for it, and the purchaser later decides to develop the property and requests title insurance not originally contemplated, the commission need not necessarily be rebated; whether a fee is "excessive" depends on all the surrounding circumstances. Finally, the Commission cautioned that under Rule 3.4(f) employment may not be accepted without written client consent where the lawyer's judgment reasonably may be affected, as it may be when the lawyer has an economic interest in selling insurance, and that this must be considered before accepting the employment.

Currency note

This opinion was issued in 1981, before Maine's replacement of the former Maine Bar Rules with the Maine Rules of Professional Conduct (effective August 1, 2009). Subsequent rule amendments or later opinions may have changed the analysis. Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific rule, deadline, or requirement mentioned here.

Common questions

Q: Can a lawyer act as both the client's attorney and the title insurance agent on the same deal?

A: The opinion concluded yes, the dual role is not absolutely prohibited, but only with complete disclosure of the financial relationship and the client's written consent obtained before the work begins.

Q: Can the lawyer keep the title insurance commission on top of the title search fee?

A: The opinion concluded no, not where the legal title work is substantially the same as and contemporaneous with the work for the insurer; the commission must be credited against the legal fee, because keeping both would be an excessive fee under Rule 3.3(a).

Q: Is the commission ever keepable?

A: The opinion concluded yes, where the insurance is a separate, later transaction, such as a purchaser who first buys a title examination and only later, deciding to develop the property, requests a policy not originally contemplated; there the commission need not necessarily be rebated.

Background and rules framework

The opinion interprets Maine Bar Rule 3.4(a) (disclosure of any adverse interest), Rules 3.4(c) and (d) (multiple employment with consent after disclosure), Rule 3.4(f) (no employment without written consent where the lawyer's judgment reasonably may be affected), and Rule 3.3(a) (excessive fees). These correspond to Model Rule 1.5 (fees), Model Rule 1.7 (conflicts of interest), and Model Rule 1.8 (business transactions with a client and related interests). The analysis turns on whether the title insurance work and the client's legal work are the same, contemporaneous transaction.

Citations and references

Rules of Professional Conduct:

• Model Rule 1.5 (fees); Model Rule 1.7 (conflicts); Model Rule 1.8 (lawyer's own interests)
• Maine Bar Rules 3.4(a), 3.4(c), 3.4(d), 3.4(f), 3.3(a); former DR 5-105(B)

Other opinions cited:

• New York State Bar Association Opinions 320 and 351 (commission must be credited against the fee for the same title work)

See also

• Maine Ethics Op. 40: Charges for Title Insurance (Amended)
• Maine Ethics Op. 26: Limitation of Liability in a Title Opinion
• Maine Ethics Op. 101: Referral of Real Estate Transactions Between Attorney-Spouses

Source

• Landing page: https://mebaroverseers.org/attorney_services/opinion.html?id=89498

Original opinion text

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

Issued by the Professional Ethics Commission

Date Issued: January 15, 1981

Question

The Commission has been asked whether Rule 3 is violated where an attorney charges a client for a title search and also charges him a premium in his capacity as agent for a title insurance company for a title insurance policy where a portion of the premium is rebated by the insurance company to the attorney-agent. A substantial portion of the premium represents the cost of the title work.

Opinion

Rule 3.4(c) and Rule 3.4(d) are largely declaratory of DR 5-105(B) of the previous Code of Professional Responsibility. That section permitted multiple employment if employment had been consented to after full disclosure. Thus present Rule 3.4 does not absolutely prohibit the dual role of attorney-agent.

Rule 3.4(a), however, regarding disclosure of any adverse interest, has no counterpart under the ABA Code. The Reporter's Notes to Rule 3.4(a) describe its purpose as follows:

. . . in drafting 3.4(a) the Commission sought to mandate complete disclosure. The duty extends to all facts that could possibly be relevant; and the test of relevance is shifted from the lawyer's judgment of his ability to act with unimpaired professional judgment to the client's judgment of the wisdom of retention. The rule is designed to insure that a client, in retaining an attorney, is completely informed about the existence of any facts which might influence the judgment of the attorney.

Because of the strong policies expressed by the adoption of Rule 3.4(a), the Commission is of the opinion that it is vital to make a complete and full disclosure of the details of the financial relationship between the attorney-agent and the title insurance company. This will extend to the formula by which the lawyer-agent will receive payment from the title insurance company.

An additional question arises as to whether an attorney may retain his commission for sale of title insurance without giving a credit for such commissions to his client. The Commission believes that such a credit must be given when the work undertaken by the attorney for the client consists basically of the same services rendered to the title insurance company. Under the provisions of Rule 3.3(a), if the attorney were permitted to retain the insurance policy sales commission under such circumstances, this would constitute an excessive fee. The New York State Bar Association in its Opinions 320 and 351 reached a similar conclusion.

The requirement that the insurance sales commission be remitted, as set forth above, presumes that the legal fee and the placement of the insurance policy are substantially part of the same transaction. The Commission can foresee other circumstances in which such would not be the rule. If, for instance, an attorney examines title for a purchaser of real estate and bills for these services, and the purchaser later determines to develop and improve the real estate and requests a policy of title insurance not originally contemplated, the insurance commission need not necessarily be rebated. In order to determine whether the fee is "excessive," all of the surrounding circumstances which affect the reasonableness of the fee must be taken into account.

One final note of caution must be addressed to the attorney-agent. In serving as attorney-agent, the requirement of Rule 3.4(f) must be kept in mind that employment may not be accepted in the absence of a written consent of the client where the lawyer's judgment "reasonably may be" affected. In advising a client with respect to the need for title insurance, the lawyer's judgment obviously may be substantially affected if the lawyer has an economic interest in selling insurance. This must be borne in mind prior to the acceptance of employment.

Conclusion

(1) Rule 3.4 does not absolutely prohibit the lawyer from serving in the dual capacity of title insurance agent and attorney providing legal services.

(2) Rule 3.4 does require complete disclosure as well as written consent of both parties in order for the lawyer to act in that capacity. This full disclosure must be obtained prior to undertaking employment.

(3) Employment may not be accepted if the lawyer's judgment on behalf of his client "reasonably may be" affected.

(4) Where the legal work done by the attorney for his client is substantially the same, and contemporaneous with the services performed by the attorney as agent for the title insurance company, the lawyer must give his client a full credit against the balance for legal services for the commission received from the title insurance company.

Footnotes

[1] The New York Bar Association based its conclusions both upon the view that there can be no distinction between fees charged to the client for title work and the fee charged to the insurer as a sales commission, as well as upon the law of agency, which requires an agent to account to his principal for a profit, absent an agreement to the contrary. The Commission bases its conclusion only on the first of these grounds. The Commission does not normally give opinions on matters of law and prefers to base its conclusion on an interpretation of the word "Fees" as used in Rule 3.3.

[2] This does not require the remittance of a fee for preparation of title insurance documents or other work for which the client has not already been billed.