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 98-37
A commercial insured suffers a fire loss in South Carolina and retains a public adjuster who is not a resident of South Carolina for purposes of adjusting the fire loss. The public adjuster will be paid a percentage of the insurance proceeds as his fee or commission. The insured seeks to retain a South Carolina lawyer (who has no other connection with the public adjuster) to oversee the activities of the public adjuster.
QUESTIONS:
1. Assuming that one acting as a public adjuster in South Carolina is engaged in the unauthorized practice of law, would the lawyer representing the insured commit any unethical impropriety by undertaking this arrangement?
2. Does the answer to Question 1 change if the lawyer is present during any settlement negotiations?
SUMMARY:
Assuming that one acting as a public adjuster in South Carolina is engaged in the unauthorized practice of law, a lawyer may not oversee the activities of such adjuster, whether or not the lawyer is also present during any settlement negotiations.
OPINION:
The legal determination of whether a nonlawyer has engaged in the unauthorized practice of law is beyond the scope of this Committee's function. For purposes of this Opinion, the facts assume that a public adjuster is engaged in the unauthorized practice of law, irrespective of lawyer oversight.
Rule 5.5(b) of the South Carolina Rules of Professional Conduct prohibits a lawyer from assisting a nonlawyer in the performance of an activity that constitutes the unauthorized practice of law. Being tantamount to assistance, the lawyer's oversight role would thus be prohibited under the Rule. The lawyer's presence during any settlement negotiations would not alter the fact that prohibited assistance had occurred. Although the Comment to Rule 5.5 states that the Rule "...does not prohibit lawyers from providing professional advice and instruction to nonlawyers whose employment requires knowledge of law; for example, claims adjusters...:, such advice and instruction would only be permitted where the nonlawyer's employment activity, in and of itself, would not constitute the unauthorized practice of law.
Rule 5.3, and further Commentary to Rule 5.5, sets forth certain responsibilities of a lawyer with regard to nonlawyer employees, independent contractors, retainees, associates and assistants. The facts do not indicate any such relationship between the lawyer and the public adjuster which, thus such authorities are not applicable.