My client's personal injury case settled, but the client and a treating physician dispute whether the medical bill is owed, and the client tells me not to pay. What do I do with the money?

Plain-English summary

The inquiring attorney had represented a client in a personal injury matter that settled. Before disbursing any funds, the attorney contacted the medical providers to verify outstanding bills. One treating physician said the client owed the balance not covered by insurance. The client disputed that balance, and the medical insurer confirmed to the attorney that the physician could not collect the balance from the client if the physician had contracted not to do so. The client had signed a medical lien form, but directed the attorney not to pay the physician, while the physician demanded payment.

The panel applied Rule 1.15. Under Rule 1.15(b), a lawyer must promptly notify a client or third person on receiving funds in which they have an interest and promptly deliver funds they are entitled to receive. Under Rule 1.15(c), when a lawyer holds property in which both the lawyer and another person claim interests, and a dispute arises over their respective interests, the disputed portion must be kept separate until the dispute is resolved. The panel also quoted the comment noting that third parties, such as a client's creditors, may have just claims against funds in a lawyer's custody, and that a lawyer may have a duty under applicable law to protect such claims against wrongful interference by the client, and accordingly may refuse to surrender the property to the client; but a lawyer should not unilaterally assume to arbitrate a dispute between the client and the third party.

Because a dispute existed between the client and the treating physician, the panel advised that the portion in dispute should be kept separate by the attorney pending a resolution, arbitration, or interpleader.

Currency note

This opinion was issued in 1995, after the Rhode Island Supreme Court adopted the Model Rules of Professional Conduct effective November 15, 1988, and it applies Rule 1.15 as originally adopted. The Rhode Island Supreme Court later revised the Rules of Professional Conduct in 2007 as part of the nationwide Ethics 2000 process. 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 Treat this page as historical context, not current guidance.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 mentioned here.

Common questions

Q: Could the attorney follow the client's instruction not to pay the physician?

A: The opinion did not authorize disbursing the disputed funds to the client either; because the funds were in dispute, the attorney had to hold the disputed portion separate under Rule 1.15 until the dispute was resolved.

Q: Could the attorney decide who was right and pay accordingly?

A: No. The opinion, quoting the comment to Rule 1.15, stated that a lawyer should not unilaterally assume to arbitrate a dispute between the client and the third party.

Q: How does the dispute get resolved?

A: The opinion identified resolution, arbitration, or interpleader as the paths for resolving the dispute while the attorney keeps the disputed portion separate.

Background and rules framework

The opinion applied Rhode Island Rule of Professional Conduct 1.15 (Model Rule 1.15), the rule on safekeeping property. Rule 1.15(b) governs prompt notice and delivery of funds in which a client or third person has an interest, and Rule 1.15(c) requires a lawyer to segregate the disputed portion of property until a dispute over competing interests is resolved. The comment recognizes that third-party creditors may hold just claims against funds in a lawyer's custody and cautions against the lawyer arbitrating the dispute.

Citations and references

Rules of Professional Conduct:

• Model Rule 1.15 / RI RPC 1.15(b) (prompt notice and delivery of funds in which a third person has an interest)
• RI RPC 1.15(c) (segregating disputed property until the dispute is resolved)

See also

• RI EAP Op. 2004-07: When a former client refuses funds, Rule 1.15 requires maintaining the trust account
• RI EAP Op. 2016-08: A third-party payor, not the client, gets a refund of excess fees

Source

• Landing page: https://www.courts.ri.gov/attorney-resources/Pages/Ethics-Advisory-Panel-default.aspx
• Original PDF: https://www.courts.ri.gov/Opinions/EAP%2095-12.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain; the linked PDF is authoritative.

FINAL

ETHICS ADVISORY PANEL
OPINION # 95-12, REQUEST # 570
Issued March 6, 1995

The inquiring attorney represented a client in a personal injury matter which has been settled. Prior to the disbursement of any funds, the inquiring attorney contacted the medical providers to verify whether any outstanding medical bills were owed.

One treating physician indicated that the client owed the balance not covered by his/her medical insurance. The client questioned the physician's billing for the balance not paid by the medical coverage. In fact, the medical insurance provider confirmed to the inquiring attorney that the physician cannot collect the balance from the client if the physician contracted not to do so. The client did sign a medical lien form in this matter. The client has directed the inquiring attorney not to pay the physician; the physician is demanding payment.

Rule 1.15 of the Supreme Court Rules of Professional Conduct addresses an attorney's dilemma when a dispute arises between a client and a third party over funds held by the attorney. That Rule provides in pertinent part:

(b) Upon receiving funds or other property in which a client or third person has an interest, a lawyer shall promptly notify the client or third person. Except as stated in this rule or otherwise permitted by law or by agreement with the client, a lawyer shall promptly deliver to the client or third person any funds or other property that the client or third person is entitled to receive and, upon request by the client or third persons, shall promptly render a full accounting regarding such property.

(c) When in the course of representation a lawyer is in possession of property in which both the lawyer and another person claim interests, the property shall be kept separate by the lawyer until there is an accounting and severance of their interests. If a dispute arises concerning their respective interests, the portion in dispute shall be kept separate by the lawyer until the dispute is resolved.

In addition, the Comments to Rule 1.15 states that:

Third parties, such as a client's creditors, may have just claims against funds or other property in a lawyer's custody. A lawyer may have a duty under applicable law to protect such third party claims against wrongful interference by the client, and accordingly may refuse to surrender the property to the client. However, a lawyer should not unilaterally assume to arbitrate a dispute between the client and the third party.

Pursuant to the above cited Rule, a lawyer "shall promptly notify" a client or third person when the attorney receives funds or property in which a client or third person claims an interest. However, if a dispute arises concerning respective interests, the portion in dispute shall be kept separate by the attorney.

Because there is a dispute regarding the client and the treating physicians, the portion in dispute should be kept separate by the inquiring attorney pending a resolution, arbitration or interpleader.