After a personal injury settlement, a physician claims a balance-billing amount my client disputes. Can I just pay the client and notify the physician, or do I have to hold the disputed money?

Plain-English summary

After settling a personal injury case, the inquiring attorney paid all outstanding medical bills out of the settlement except a disputed physician's bill. The physician, a participating provider in the client's health insurance, had been paid by the insurer to the extent allowed and claimed the client owed the balance, asserting that balance-billing is permitted when there is third-party liability. The client asserted responsibility only for the deductible and several non-covered items. The attorney had withheld the full amount claimed for over a year without resolution, having tried and failed to engage the physician and the physician's attorney in negotiations, and had notified the physician that the attorney would disburse the entire withheld amount to the client unless, by a set date, the physician accepted the lesser amount as payment in full or filed suit. The attorney asked whether to hold the amount the client conceded owing and forward the rest to the client, or disburse the entire amount to the client with notice to the physician.

The panel concluded that Rule 1.15(b) obligated the attorney to protect the disputed funds by either retaining them in the trust account until resolution or, if no resolution was reached after a reasonable time, paying them into the court registry in an interpleader action, with a full accounting to the interested parties. The panel declined to opine on whether balance-billing was permitted or whether the client owed the balance, treating those as questions of substantive law outside legal ethics. It referred the attorney to its General Informational Opinion No. 7 (1997), which set out the same Rule 1.15(b) obligations for settlement funds in which third parties such as medical providers have an interest.

Currency note

This opinion was issued in September 1997, 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 Treat this page as historical context, not current guidance.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: Can a lawyer release disputed settlement funds to the client over a provider's objection?

A: No. The opinion concluded that Rule 1.15(b) required protecting the disputed amount by holding it in trust or interpleading it, not disbursing it to the client.

Q: How long must the lawyer keep holding the disputed funds?

A: The opinion said the lawyer must retain the funds in trust until resolution, and if no resolution is reached after a reasonable time, may pay them into the court registry through interpleader with a full accounting.

Q: Does the panel decide who is actually owed the money?

A: No. The opinion treated whether balance-billing was permitted and whether the client owed the balance as questions of substantive law outside the panel's ethics jurisdiction.

Background and rules framework

The opinion applied Rhode Island Rule of Professional Conduct 1.15 (Model Rule 1.15). Rule 1.15(b) requires a lawyer who receives funds in which a client or third person has an interest to notify them promptly, to deliver promptly any funds the client or third person is entitled to receive, and to render a full accounting on request. The panel read this to require holding disputed amounts, in which both the client and the physician claimed an interest, in trust or in the court registry until the dispute is resolved, and pointed to its General Informational Opinion No. 7 for the underlying rationale.

Citations and references

Rules of Professional Conduct:

• Model Rule 1.15 / RI RPC 1.15(b) (safekeeping property; funds in which a third person claims an interest)

Other opinions cited:

• RI EAP General Informational Opinion No. 7 (1997): a lawyer's Rule 1.15(b) obligations when third persons such as medical providers claim settlement funds

See also

• RI EAP Op. 97-20: Holding disputed settlement funds without interpleader
• RI EAP Op. 98-14: Splitting a contingent fee with a disbarred referring attorney

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%2097-17.pdf

Original opinion text

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

Final

                        RHODE ISLAND SUPREME COURT
                           ETHICS ADVISORY PANEL
                       OPINION NO. 97-17, REQUEST NO. 723
                             Issued September 11, 1997

Facts:

    After settling a personal injury case on behalf of a client, the inquiring attorney paid out

of the settlement funds all outstanding medical bills except a physician's bill in which there is a
dispute about the amount owed. The physician is a participating physician in the client's health
insurance program. The physician, who had been paid by the health insurer to the extent allowed
under his/her agreement with the insurer, claims that the client owes the balance of the fee for
his/her services which the health insurer did not pay, asserting that balance-billing is permitted
when there is third party liability. The client asserts that he/she is only liable for his/her deducti-
ble under the policy and for several non-covered items. The inquiring attorney has withheld the
full amount claimed by the physician for over a year without resolution. He/she attempted sev-
eral times to engage the physician and his/her attorney in negotiations, but they have failed to re-
spond. The inquiring attorney recently notified the physician that he/she will disburse to the cli-
ent the entire amount being withheld unless by a specified date the physician either accepts the
lesser amount as payment in full, or commences a lawsuit to protect his/her interest in the
amount claimed.

Issue Presented:

   The inquiring attorney asks whether he/she may hold the amount that the client agrees

he/she owes the physician and forward the remainder of the money to the client, or whether
he/she should disburse the entire amount to the client with notice to the physician.

Opinion:

    The inquiring attorney has an obligation under Rule 1.15(b) of the Rules of Professional

Conduct to protect the funds which are in dispute by either retaining them in his/her trust account
until resolution or if after a reasonable time no resolution is reached, paying them into the court
registry in an interpleader action, with a full accounting to the interested parties.

Reasoning:

   Whether balance-billing by physicians is permitted by the terms of the agreement be-

tween the health insurer and the physician and whether the client is required to pay the balance
under the terms of the client's agreement with the health insurer are questions of substantive law
outside the area of legal ethics and discipline. Therefore the Panel does not express a view on
those matters.
Final
Op. 97-17
Page 2

   The rule applicable to this inquiry is Rule 1.15(b) which states:

     (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.

   In Ethics Advisory Panel General Informational Op. No. 7 (1997) the Panel recently dis-

cussed a lawyer's obligations under Rule 1.15(b) in the disbursement of a client's settlement
funds in which third persons such as medical providers have an interest. The rationale set forth
in General Informational Opinion No. 7 is applicable to the instant request, and the Panel refers
the inquiring attorney to that opinion.

   Ethics Advisory Panel advice is protective in nature. There is no requirement that an at-

torney abide by a Panel opinion, but if he or she does, he or she is fully protected from any
charge of impropriety.