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 91-21
May a law firm act in the capacity of a title insurance agency under the name of the firm or should there be a separate corporate entity established for that purpose?
Summary:
The Rules of Professional Conduct do not require a law firm to establish a separate entity for the purpose of acting in the capacity of a title insurance agency as long as the method of operation of the law firm as a title insurance agency does not otherwise violate the rules.
Opinion:
This Opinion assumes that the definition of "law firm" as set forth in the question is the same as that established by the South Carolina Rules of Professional Conduct (Rule 407):
"Firm" or "law firm" denotes a lawyer or lawyers in a private firm, lawyers employed in the legal department of a corporation or other organization and lawyers employed in a legal services organization. See Comment, Rule 1.10.
If anyone other than a lawyer in the law firm is acting in the capacity of a title insurance agent, such conduct would probably violate Rule 5.4 and could potentially violate Rule 5.5. The establishment of a separate entity where non-lawyers as well as lawyers would be acting as title insurance agents may avoid any violation of the foregoing rules. See SC Bar Advisory Opinion 90-16.
Except in the case of a direct violation of Rule 5.4 or Rule 5.5 where non-lawyer title agents might be directly involved in the business of the law firm, there appears to be no requirement that lawyers establish a separate entity to act in the capacity of a title agency. The potential ethical problems which might arise would result from the actual manner or methods of operation utilized by the law firm in acting in the capacity of a title agency and not from particular form of entity doing business. See SC Bar Advisory Opinion 75-03 (Lawyer connected with title insurance company could not be named in the advertising of the title insurance company, nor could the law firm indicate the use of such insurance of its letterhead); SC Bar Advisory Opinion 90-16 (The law firm may not utilize or recommend the title insurance company except in accordance with Rule 1.7(b) and Rule 1.8(f); SC Bar Advisory Opinion 89-03 (Disclosure of information to the title insurance company involving a client's file must be made only in accordance with Rule 1.6).