Can a lawyer take a share of a public adjuster's commission on the client's fire-loss claim?

Plain-English summary

The committee was asked whether a lawyer may share in the proceeds of a commission obtained by a fire adjuster in connection with a loss sustained by the lawyer's client. It first noted that the committee does not pass on questions of law; if the proposed sharing were illegal it would also be unethical, so the committee assumed for purposes of the opinion that the adjuster could lawfully share his commission and that the arrangement was otherwise free of any taint of illegality.

On the ethics, the committee located the governing provisions in EC 2-21 and DR 5-107(A)(2). Both permit a lawyer to accept compensation related to the representation from someone other than the client, but only with the client's knowledge and consent after full disclosure. The committee read the Code's evident intention as not to augment what would otherwise be an appropriate fee, but merely to provide alternative sources for the lawyer's just compensation (EC 2-17, DR 2-106). It cited its own prior rulings that a lawyer should credit the client with fees or discounts obtained from title companies in connection with the client's affairs (N.Y. State 351 (1974), N.Y. State 320 (1973)).

The committee framed the controlling principle as one of undivided loyalty: the only legitimate reason for a lawyer to become involved in a client's affairs is to protect, preserve, or enhance the client's interests, so any effort the lawyer expends must redound to the client's advantage. It stated that self-dealing, even with the client's informed consent, is fundamentally inconsistent with the lawyer's role as advocate and adviser. Where compensation is offered to the lawyer simply because he enjoys the client's confidence and is in a position to employ others in the client's affairs, equity and the nature of the lawyer's office require that any funds the lawyer secures be credited to the client.

Applying those principles, the committee held it would not be unethical for the lawyer to accept a portion of the adjuster's commission, provided the client, with full knowledge of the facts, consented to the arrangement and all proceeds the lawyer secured were credited or otherwise disbursed to the client.

Currency note

This opinion was issued in 1977, before New York replaced the Code of Professional Responsibility with the Rules of Professional Conduct in 2009 (compensation from a third party is now governed by Rule 1.8(f), business dealings with a client by Rule 1.8(a), and fees by Rule 1.5). 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 accept money from a public adjuster connected to the client's claim?

A: Under this opinion, only with the client's knowledge and consent after full disclosure, as required by EC 2-21 and DR 5-107(A)(2).

Q: Can the lawyer keep that commission share as extra fee?

A: No. The committee held the proceeds must be credited or disbursed to the client; the Code provides alternative sources for just compensation, not a way to augment an otherwise appropriate fee.

Q: Why must the money go to the client even with consent?

A: The committee reasoned that a lawyer's involvement in a client's affairs must benefit the client, and that compensation offered only because the lawyer holds the client's confidence belongs to the client; self-dealing is inconsistent with the lawyer's role even with consent.

Background and rules framework

The opinion applies EC 2-21 and DR 5-107(A)(2) (a lawyer may take compensation from a third party only with the client's informed consent) together with EC 2-17 and DR 2-106 (the lawyer is entitled only to appropriate compensation for services). The current Model Rule analogues are Rule 1.8(f) (accepting compensation from one other than the client), Rule 1.8(a) (business transactions with a client), and Rule 1.5 (fees).

Citations and references

Rules of Professional Conduct:

• MR 1.8 (current client conflicts; third-party compensation; business transactions)
• MR 1.5 (fees)
• NY EC 2-17, EC 2-21; DR 2-106, DR 5-107(A)(2)

Other opinions cited:

• N.Y. State 104 (1969): lawyer's fee paid out of client's recovery
• N.Y. State 351 (1974); N.Y. State 320 (1973): crediting client with title-company fees or discounts

See also

• NY State Bar Op. 467: Repeated referrals from a real estate broker
• NY State Bar Op. 1043: A referral fee from a real estate broker's commission
• NY State Bar Op. 1000: Fees paid by a third party with adverse interests

Source

• Landing page: https://nysba.org/opinion-461/