Can a lawyer advance funds to a client in anticipation of a not-yet-approved industrial insurance (L&I) claim?

Plain-English summary

The inquiry asked whether a lawyer representing clients on industrial insurance claims against the Department of Labor and Industries (L&I) may advance funds to a client in anticipation of receiving the Department's payment, where the lawyer is almost certain the claim will be approved but it has not yet been approved.

The committee answered no. It was of the opinion that such advances are not authorized by RPC 1.8(e), and that, depending on the circumstances, an advance may also be a business transaction with a client that does not meet the requirements of RPC 1.8(a). The committee explained that RPC 1.8(e), although phrased as a prohibition, operates as a grant of permission to advance limited financial assistance for the expenses of contemplated or pending litigation, such as advancing a doctor's fee for a medical examination to support a claim. What the lawyer cannot do is advance funds for a purpose unrelated to the expense of litigation.

The committee drew a line at approval of the claim. Once an L&I claim is approved, a lawyer may properly advance funds to the client against the amount to be paid by the Department, because there is then no litigation contemplated or pending in relation to those funds. Such an advance must be made in full compliance with RPC 1.8(a), including written disclosure and client consent.

Currency note

This opinion was issued in 1988, before the 2006 revisions to the Washington Rules of Professional Conduct. The rule then numbered RPC 1.8 (including subsections (a), (e), and (j)) corresponds to Model Rule 1.8 and was later renumbered and amended. Treat this page as historical context, not current guidance.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 advance money to a client while an L&I claim is still pending approval?

A: Per the opinion, no. The committee was of the opinion that an advance in anticipation of a not-yet-approved claim is not authorized by RPC 1.8(e), and may also be a business transaction that fails RPC 1.8(a).

Q: What kinds of advances does RPC 1.8(e) allow in an L&I matter?

A: Litigation expenses. The committee gave the example of advancing a doctor's fee for a medical examination needed to support the claim. The lawyer cannot advance funds for some other purpose unrelated to the expense of litigation.

Q: Does the answer change once the claim is approved?

A: Yes. After approval, the committee was of the opinion that a lawyer may advance funds against the amount the Department will pay, because no litigation is then contemplated or pending as to those funds, provided the advance complies fully with RPC 1.8(a), including written disclosure and client consent.

Background and rules framework

The opinion applies the rule then numbered Washington RPC 1.8, corresponding to Model Rule 1.8. The committee read RPC 1.8(e) as permitting a lawyer to advance limited financial assistance for the expenses of contemplated or pending litigation, an exception to RPC 1.8(a)'s limits on business transactions with a client and to RPC 1.8(j)'s bar on acquiring a proprietary interest in the cause of action. It treated the approval of the L&I claim as the point at which litigation is no longer pending, so that a post-approval advance is governed by RPC 1.8(a) rather than barred by RPC 1.8(e).

Citations and references

Rules of Professional Conduct:

• Washington RPC 1.8(e) (financial assistance to a client in connection with litigation), corresponding to Model Rule 1.8(e).
• Washington RPC 1.8(a) (business transactions with a client), corresponding to Model Rule 1.8(a).
• Washington RPC 1.8(j) (acquiring a proprietary interest in a cause of action), corresponding to Model Rule 1.8(i).

Statutes:

• RCW 51.52.050 (appeal of an adverse Department decision to the Board of Industrial Insurance Appeals).

See also

• WSBA Ethics Op. 1162: advancing funds to a client after a settlement, with no pending litigation
• WSBA Ethics Op. 1145: whether a lawyer may personally guarantee a client's settlement payment
• WSBA Ethics Op. 1044: taking a deed of trust and note from a client to secure future fees

Source

• Landing page: https://ao.wsba.org/print.aspx?ID=261

Original opinion text

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

Advisory Opinion: 1181
Year Issued: 1988
RPC(s): RPC 1.8(a), 1.8(e), 88-4
Subject: Advances to Clients on Industrial Insurance Claims Prohibited [Published as Informal Opinion 88-4]

[Formerly published as Published Informal Opinion 88-4. All Informal Opinions are consolidated in this database.]

Question: May a lawyer properly advance funds to a client in anticipation of receipt of funds from the Department of Labor and Industries when the lawyer is reasonably certain that the industrial insurance claim will be, but has not yet been, approved by the Department?

Answer: No. Such advances are not authorized by RPC 1.8(e), which prohibits a lawyer from acquiring a proprietary interest in a cause of action. Depending upon the circumstances, such an advance may also be a business transaction with a client that does not meet the requirements of RPC 1.8(a). However, if the claim had been approved but the funds were not yet received, such an advance made in compliance with RPC 1.8(a) would be permitted because there would be no pending litigation in connection with those funds.

Discussion: An inquiry has been made to the Rules of Professional Conduct Committee asking whether it is proper for a lawyer representing clients in making industrial insurance claims against the Department of Labor and Industries to make advances to clients, in anticipation of receipt of funds from the Department in situations where the lawyer is almost certain that the claim will be approved by the Department. Such claims are subject to review by the Department, and an adverse decision may be appealed to the Board of Industrial Insurance Appeals pursuant to RCW 51.52.050.

Rule 1.8 of the Rules of Professional Conduct provides in part: A lawyer who is representing a client in a matter . . . (e) shall not, while representing a client in connection with contemplated or pending litigation, advance or guarantee financial assistance to his or her 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, provided that the client remains ultimately liable for such expenses.

Subsection (e), although phrased in terms of a prohibition of financial assistance, is in substance a grant of permission to the lawyer to advance or guarantee limited financial assistance with expenses incurred in connection with contemplated or pending litigation. In this sense, subsection (e) is an exception to subsection (a), which limits the right of a lawyer to enter into a business transaction with a client, and subsection (e), which prohibits a lawyer from acquiring a proprietary interest in a cause of action or subject matter of litigation, except for a lien or contingent-fee arrangement. subsection (e) enables a lawyer to advance or guarantee expenses of contemplated or pending litigation without being concerned with the business transaction restrictions set out in subsection (a), the proprietary interest prohibitions of subsection (j), or common-law maintenance—furnishing another with funds to carry on litigation.

Thus in the context of an L & I claim, a lawyer could advance fees to a doctor to obtain a medical examination necessary to support a client`s claim, because such an advance is permitted by RPC 1.8(e) as an expense of litigation. What the lawyer cannot do is make an advance for some other purpose not related to the expense of litigation.

After an L & I claim is approved, however, a lawyer may properly make an advance to a client against the funds to be paid by the Department on the claim, because there would be no litigation contemplated or pending in relation to those funds. Such an advance would have to be made in full compliance with the requirements of RPC 1.8(a), including the requirements of written disclosure and client consent.