Emerging Regional Consensus: Prohibiting Indemnification by Plaintiffs’ Counsel

Law books

In 1997, the Bar issued ethics advisory opinion No. 1736, addressing whether a claimants’ counsel could indemnify a settling defendant to protect the defendant from outstanding liens that might encumber the settlement. The Bar concluded that the answer was “no” because that would constitute a form of financial assistance beyond the narrow parameters of the rules of professional conduct 1.8(e).
Then, as now, RPC 1.8(e) limited permissible financial assistance to court costs and similar litigation expenses. Then, as now, RPC 8.4(a) prohibited a lawyer from inducing another lawyer to violate the RPCs. Read together, these two provisions effectively prohibited a defense lawyer from asking for an indemnity and a claimants’ counsel from agreeing to one. By contrast, a settling client could agree to indemnify a settling defendant.

When it was issued, WSBA advisory opinion 1736 most often arose in the context of traditional hospital or physicians’ liens. Those continue to fall within the opinion. More recently, however, advisory opinion 1736 has found new life as Medicare liens have come to figure more prominently in settlements in areas such as asbestos litigation that often involve older claimants. Under the Medicare, Medicaid and the SCHIP Extension Act of 2007, the federal government has a right of action against settling defendants (among others) in personal injury cases for reimbursement of Medicare payments made to a plaintiff for the injuries involved unless the settlement is first reported to, and the lien resolved with, Medicare. In an effort to protect themselves from Medicare and other liens, defendants commonly ask for indemnity agreements from plaintiffs on settlement. Still others re-examined the possibility of extending the indemnity to the plaintiffs’ counsel. In Washington, however, the broad sweep of advisory opinion 1736 precluded the latter.

Although Washington’s ethics opinion preceded the more recent focus on Medicare liens, its approach foreshadowed an emerging consensus regionally (and nationally) on this issue. Last year, Alaska issued an ethics opinion — 2014-4 — adopting the same logic and conclusion as its Washington counterpart. The Alaska opinion addresses both traditional medical liens and more recent Medicare liens. It also usefully collects many similar ethics opinions nationally on this point. Like Washington, the Alaska opinion concludes that Alaska’s version of RPC 1.8(e) prohibits a claimant’s attorney from indemnifying a settling defendant. The Alaska opinion also expressly finds that a defense lawyer cannot ask for a prohibited indemnity under the Alaska formulation of RPC 8.4.

This year, Oregon followed. Oregon State Bar Formal Opinion 2015-190 covers both traditional and newer Medicare liens. As with Washington and Alaska, the Oregon opinion concludes that Oregon’s version of RPC 1.8(e) also prohibits a claimant’s lawyer from indemnifying a settling defendant. Although the Oregon opinion does not discuss the role of defense counsel, Oregon’s version of RPC 8.4 also prohibits a lawyer from inducing another lawyer to violate the RPCs and, therefore, effectively reaches the same parallel position as Washington and Alaska.

Idaho does not currently issue ethics opinions, but Idaho’s versions of RPCs 1.8(e) and 8.4(a) are similar to their Northwest counterparts.