Can a lawyer advance money to a client to pay for a rental car before the client's insurance claim is settled?

Plain-English summary

A client sought a lawyer's assistance in settling insurance claims arising out of an automobile accident. Before settlement the client needed transportation but could not afford a rental car, and the committee was asked whether the lawyer could advance money to the client to pay for one.

The committee said the lawyer may not advance money for a rental car before settlement because that is not a cost of litigation. It explained that when a lawyer advances money to a client during or before contemplated litigation, the lawyer acquires a proprietary interest in the matter, which Rule 1.8(j) generally prohibits, and that Rule 1.8(e) more specifically prohibits providing financial assistance to a client in connection with pending or contemplated litigation, subject to one limited exception. A lawyer hired to settle an accident claim is representing the client in connection with at least contemplated litigation, so the question is whether the advance fits the Rule 1.8(e) exception, which permits a lawyer to advance (or pay, if the client is indigent) only "court costs and expenses of litigation." Because the Rule makes no mention of living or transportation expenses, the committee concluded any such advance would be improper under Rule 1.8(e). It noted that prior DR 5-103, citing In re Reaves, similarly limited permissible advances to litigation expenses such as court costs and the costs of preparing a case for trial, and found nothing in the current Rules suggesting a different result.

Currency note

This opinion was issued in 1991, before the South Carolina Bar's adoption of the 2005 revisions to the Rules of Professional Conduct. 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 Treat this page as historical context, not current guidance.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 advance a client money for a rental car before the case settles?

A: The committee said no; a rental car is not a cost of litigation, and Rule 1.8(e) permits advancing only court costs and expenses of litigation.

Q: Why does advancing living or transportation costs violate the Rule?

A: The committee said advancing money gives the lawyer a proprietary interest in the matter (Rule 1.8(j)), and Rule 1.8(e) bars financial assistance in connection with litigation except for court costs and litigation expenses.

Q: What may a lawyer advance under Rule 1.8(e)?

A: The committee said only court costs and expenses of litigation, which may be advanced on a contingent basis (and paid outright if the client is indigent).

Background and rules framework

The opinion interprets Rule 1.8(e) (financial assistance to a client in connection with litigation) and Rule 1.8(j) (acquiring a proprietary interest in the cause of action), corresponding to Model Rule 1.8. The committee read the 1.8(e) exception narrowly, confined to court costs and litigation expenses, and traced the same limit through prior DR 5-103 and In re Reaves.

Citations and references

Rules of Professional Conduct:

• South Carolina RPC 1.8(e) / Model Rule 1.8: a lawyer shall not provide financial assistance to a client in connection with litigation, except court costs and expenses of litigation.
• South Carolina RPC 1.8(j) / Model Rule 1.8: a lawyer shall not acquire a proprietary interest in the cause of action.

Cases:

• In re Reaves, 250 S.E.2d 329 (S.C. 1978), loans to clients permissible only as a guarantee of the expenses of litigation.

See also

• CBA Formal Op. 34: Advancing a Client's Living Costs
• ABA Formal Op. 04-432: Posting Bail for a Client

Source

• Landing page: https://www.scbar.org/for-lawyers/quicklinks/legal-resources/ethics-advisory-opinions/ethics-advisory-opinion-91-31/

Original opinion text

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

UPON THE REQUEST OF A MEMBER OF THE SOUTH CAROLINA BAR, THE ETHICS ADVISORY COMMITTEE HAS RENDERED THIS OPINION ON THE ETHICAL PROPRIETY OF THE INQUIRER’S CONTEMPLATED CONDUCT. THIS COMMITTEE HAS NO DISCIPLINARY AUTHORITY. LAWYER DISCIPLINE IS ADMINISTERED SOLELY BY THE SOUTH CAROLINA SUPREME COURT THROUGH ITS COMMISSION ON LAWYER CONDUCT.

Ethics Advisory Opinion 91-31

Clients has sought Lawyer's assistance in settling insurance claims arising out of an automobile accident. Prior to settlement, Client requires transportation, but cannot afford a rental car.

Question:
May the Lawyer advance money to Client prior to settlement of the insurance claim to pay for a rental car.

Summary:
Lawyer may not advance money to Client to pay the cost of a rental car prior to settlement since that is not a cost of litigation.

Opinion:
Whenever a lawyer advances money to a client during or prior to contemplated litigation, the lawyer acquires a proprietary interest in the matter, since repayment likely depends upon a successful resolution of the matter. See Ethical Consideration 5-8 under former S.C. Code of Prof. Resp. (repealed Sept. 1, 1990). Rule 1.8 (j) is general prohibition on a lawyer acquiring such proprietary interest. Rule 1.8 (e) more specifically prohibits a lawyer from providing any financial assistance to a client in connection with pending or contemplated litigation, with one specific, limited exception.

It may reasonably be assumed that a lawyer hired to settle an insurance claim in an accident case is representing the client in connection with at least contemplated litigation. The question here, then, is whether advances of the type described are permitted within the exception of 1.8 (e). Rule 1.8 (e) permits a lawyer to advance (or pay if the client is indigent) only "court costs and expenses of litigation." This narrow exception recognizes that without an advance of costs of litigation clients might be unable to seek legal redress of injuries. The exception permits such advances as are needed to avoid that result.

The Rule makes no mention of permitting a lawyer to advance other expenses such as living expenses or transportation expenses. In the absence of any express exception for rental car or similar costs, we believe that any such advance would be improper under the general prohibition of Rule 1.8 (e). Prior Disciplinary Rule 5-103 under the old Code of Professional Responsibility did differ significantly from Rule 1.8 (e) with regard to the types of costs and expenses that could be advanced.1 Applying DR 5-103, the South Carolina Supreme Court indicated in 1978 that loans to clients were impermissible unless "confined to a permissible guarantee of the expenses of litigation including such items as court costs and expenses of preparing a case for trial. "In re Reaves, 250 S.E.2d 329, 330 (1978). Costs of a rental car would not appear to be of the type contemplated by the Court as permissible under old DR 5-103, and we find no language in the current Rules to suggest a different result following their adoption.

1 DR 5-103 provided in relevant part as follows: While representing a client in connection with contemplated or pending litigation, a lawyer shall not advance or guarantee financial assistance to his client, except that a lawyer may advance or guarantee the expenses of litigation, including court costs, expenses of investigation, expenses of medical examination, and costs of obtaining and presenting evidence.

The main difference between DR 5-103 (B) and Rule 1.8 (e) is that Rule 1.8 (e) permits costs to be advanced on a contingent basis.