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Utah Ethics Opinions fault of the named insured or other persons entitled to PIP benefits.'"9 In the vast majority of these cases "payment is 1992. generated automatically by simply filing a standard one page claim form with the insurer."10 "Since there is 114. USB EAOC Opinion No. 114 virtually no risk and the time to be required to the lawyer is minimal, [state bar ethics committees and] courts uniformly Utah State Bar hold that contingent fees are an improper measure of Ethics Advisory Opinion Committee professional compensation in such cases."11 Opinion No. 114 State bars that have considered this matter have stated their positions clearly and concisely. According to the State Bar Approved February 20, 1992 of Georgia: Issue: Is a one-third contingency fee charged by an attorney Generally a lawyer may not charge a fee contingent on a unreasonable or excessive if the recovery includes personal client's receipt of PIP benefits (accident insurance providing injury protection ("PIP" or "no fault") payments from the compensation to injured persons without regard to fault). client's insurer? Contingent fees are generally higher because receipt of the fee is itself contingent on some possibility. Since PIP Opinion: Under the Utah Rules of Professional Conduct, benefits are virtually guaranteed to accident victims a fee which require that a lawyer's fee be reasonable,1 contingent contingent on receipt of those benefits is likely to be fees charged for the routine filing and collection of unreasonable.12 undisputed PIP or "no fault" claims from the client's insurer are unreasonable and excessive.2 State bars, courts, and The South Carolina Bar agrees: commentators facing this issue uniformly agree that A lawyer may not consider the amounts recovered from the contingent fees charged on the recovery of undisputed PIP client's personal injury protection insurance coverage in payments are unreasonable. "Contingent fees are generally determining the percentage of his contingent fee unless the higher [than fixed fees] because receipt of the fee is itself insurer denies coverage because of a good faith question contingent on some possibility. Because PIP benefits are concerning the causal connection between the injury and virtually guaranteed to accident victims a fee contingent on accident. Only when there is a question concerning the receipt of those benefits is likely to be unreasonable."3 availability of coverage are the lawyer's time, labor, skill Analysis of Authority: The validity and utility of the and expertise instrumental in establishing the injury contingent fee was long ago recognized in the United resulting from the accident. Those factors are not needed States. It is justified mainly because it is often the only way when the insurer admits liability or the insurer makes a bad that "a person of ordinary means may prosecute a just claim faith denial of coverage. The client must be fully informed to judgment."4 Due to its vast potential for abuse, however, and should make the decision whether a fixed fee may be the contingent fee must be regulated.5 Accordingly, the reasonable.13 ABA has recognized that "[a] contract for a contingent fee, Similarly, the Maryland State Bar Association has where sanctioned by law, should be reasonable under all the concluded that "[w]hen there is virtually no risk and no circumstances of the case, including the risk and uncertainty uncertainty, contingent fees represent an improper measure of the compensation."6 Implicit in the concept of the of professional compensation" and thus charging a contingent fee is the notion that there is an actual contingent fee for collection of PIP benefits is contingency upon which the attorney's chances of being "unreasonable and unconscionable."14 compensated are based. In other words, there must be a realistic risk of nonrecovery. A fairly large body of case For these reasons, many attorneys handling personal injury law supports this general conclusion.7 Commentators also matters on a contingent fee basis submit the PIP claim as a agree.8 perfunctory accommodation to the client. However, since filling out forms of a legal nature, simple though they may During the last twenty years, many states have adopted "no be, is certainly part of a lawyer's work, the Committee feels fault" legislation mandating that all automobile owners that a reasonable charge based on the time actually spent in carry PIP coverage. "The purpose behind this legislatively the preparation of the claim may be ethically charged. Also, mandated requirement `is to assure financial compensation if a genuine dispute arises with the insurance carrier to victims of motor vehicle accidents without regard to the requiring the attorney to perform substantial legal services to establish coverage and to generate recovery, of course, he under Utah Rules of Professional Conduct 1.5. may make an appropriate charge based on time spent and other relevant factors, and, in some cases, based on a Footnotes contingent fee arrangement. 1. Utah Rules of Professional Conduct Rule 1.5(a). Courts facing this issue agree that contingent fees charged by an attorney for the recovery of PIP payments are almost 2. This Opinion is intended to address only those situations always inappropriate.15 In Attorney Grievance Comm'n v. in which undisputed PIP benefits are obtained from the Kemp,16 the Maryland Court of Appeals held that a client's insurer. This Opinion does not address the propriety one-third contingent fee in a personal injury case was of contingent fees in less obvious cases. For example, when clearly excessive where it was collected by the attorney on a client has been offered a settlement from an adverse PIP payments that followed automatically upon the filing of party's insurer, and then retains an attorney to assist the a simple form.17 Referring to a 1976 Maryland State Bar client in obtaining a greater recovery than that already Association Formal Opinion,18 the court stated: offered, a question may arise concerning the ethical propriety of a contingent fee that includes a percentage of [I]t would be unethical, in virtually all cases, for a lawyer the total recovery. The issue of whether an attorney may to charge a contingent fee for collecting a claim against his properly receive a contingent fee on the eventual recovery client's own insurer under the PIP coverage when the without first deducting from the recovery that amount attorney has been engaged on a contingent fee basis to offered prior to the attorney's retention is not covered by handle a personal injury claim against a third party. this Opinion. [C]ontingent fees are permissible only when they are reasonable under all the circumstances, including such 3. State Bar of Georgia Op. 37, Lair's Manual on relevant factors as the risk and uncertainty.19 Professional Conduct § 801:2703 (ABA/BNA Jan. 20, 1984). A significant body of case law also supports the general conclusion that where there is virtually no risk of 4. In re Swartz, 686 P.2d 1236, 1242 (Ariz. 1984), quoting nonrecovery, a contingent fee charged by an attorney on the Note, Lawyer's Tight-Rope-Use and Abuse of Fees, 41 amount of the recovery is inappropriate.20 For example, in Cornell L.Q. 683, 689 (1956). Committee on Legal Ethics v. Tatterson ,21 the Supreme 5. Id. Court of Appeals of West Virginia held that disbarment was warranted where, while other disciplinary proceedings were 6. ABA Canons of Professional Ethics 13 (emphasis pending against him, an attorney charged a one-third added). contingent fee to collect the undisputed proceeds of a life insurance policy. The court found that such a contingent fee 7. E.g., Rosquist v. Soo Line R.R., 692 F.2d 1107, 1114 was not justified, stating: (7th Cir. 1982); Donnarumma v. Barracuda Tanker Corp., 79 F.R.D. 455, 467 (D. Cal. 1978); Kiser v. Miller, 364 F. The client needs to be fully informed as to the degree of Supp. 1311, 1319 (D.D.C. 1973); In re Swartz , 686 P.2d risk justifying a contingent fee. Courts generally have 1236, 1239-43 (Ariz. 1984); People v. Nutt, 696 P.2d 242, insisted that a contingent fee be truly contingent. The 248 (Colo. 1984); Anderson v. Kenelly, 547 P.2d 260, 261 typically elevated contingent fee reflecting the risk to the (Colo. Ct. App. 1975); Robinson v. Sharp, 66 N.E. 299, 301 attorney of receiving no fee will usually be permitted only (Ill. 1903); Horton v. Butler, 387 So. 2d 1315, 1317-18 (La. if the representation indeed involves a significant degree of Ct. App. 1980), cert. denied, 394 So. 2d 607 (La. 1980); risk. The clearest case where there would be an absence of Thomton, Sperry & Jensen, Ltd. v. Anderson, 352 N.W.2d real risk would be a case in which an attorney attempts to 467, 469 (Minn. Ct. App. 1984); Citizens Bank v. C & H collect from a client a supposedly contingent fee for Construction & Paving Co., 600 P.2d 1212, 1218 (N.M. obtaining insurance proceeds for a client when there is no 1979); Redevelopment Comm'n of Hendersonville v. Hyder, indication that the insurer will resist the claim. In the 201 S.E.2d 236, 239 (N.C. Ct. App. 1973); Committee on absence of any real risk, an attorney's purportedly Legal Ethics v. Tatterson, 352 S.E.2d 107, 113-14 (W. Va. contingent fee which is grossly disproportionate to the 1986). amount of work required is `clearly an excessive fee' . .22 8. Annotation, Reasonableness of Contingent Fee in Conclusion: Based upon the above authorities and Personal Injury Action, 46 Am. Jur. Proof of Facts 2d 1, reasoning, it is clear that in the vast majority of cases, a 24-27 (1986).

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