Can Plaintiff Attorneys Indemnify Defendants for Unpaid Liens?

Attorneys on both sides of tort settlements should take caution of a growing trend in ethics. A new ethics opinion from the State of Tennessee makes it the twelfth jurisdiction to address the impropriety of an attorney indemnifying a tortfeasor from being responsible for unpaid medical bills. On September 10, 2010 the Board of Professional Responsibility of the Supreme Court of Tennessee issued Formal Ethics Opinion No. 2010-F-154 providing the latest commentary on a mounting trend that makes it impermissible for an attorney to provide indemnification in a settlement agreement due to the conflict of interest it creates between the attorney and client. This Practice tip lists the related opinions from other jurisdictions, outlines the key issues addressed in the Tennessee opinion, and then makes recommendations on avoiding these conflicts that are important to settling parties.

The Garretson Resolution Group (“GRG”) stands ready to monitor and report the latest ethics trends related to tort settlements to keep the settlement community informed and on the forefront of prudent practice. We offer practical guidance to address areas of common concern for practitioners and ensure compliance with the evolving standards in this area.

Among the tips included in this pamphlet are:

  • Under what scenario does the issue of attorney indemnification as a condition of settlement commonly arise?
  • Which states have formal ethics opinions addressing the attorney indemnification issue and what guidance do these decisions provide?
  • What are the most noteworthy findings arising out of the recent Tennessee ethics opinion addressing this issue?
  • What are the responsibilities of attorneys on both sides of settlement negotiation in light of the current trend?
  • What is the appropriate response to a client’s insistence of accepting a settlement offer that requires an indemnification agreement from the attorney?
  • How should an attorney conduct oneself when faced with an ethical dilemma?