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鈥橲 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 91-31
Clients has sought Lawyer's assistance in settling insurance claims arising out of an automobile accident. Prior to settlement, Client requires transportation, but cannot afford a rental car.
Question:
May the Lawyer advance money to Client prior to settlement of the insurance claim to pay for a rental car.
Summary:
Lawyer may not advance money to Client to pay the cost of a rental car prior to settlement since that is not a cost of litigation.
Opinion:
Whenever a lawyer advances money to a client during or prior to contemplated litigation, the lawyer acquires a proprietary interest in the matter, since repayment likely depends upon a successful resolution of the matter. See Ethical Consideration 5-8 under former S.C. Code of Prof. Resp. (repealed Sept. 1, 1990). Rule 1.8 (j) is general prohibition on a lawyer acquiring such proprietary interest. Rule 1.8 (e) more specifically prohibits a lawyer from providing any financial assistance to a client in connection with pending or contemplated litigation, with one specific, limited exception.
It may reasonably be assumed that a lawyer hired to settle an insurance claim in an accident case is representing the client in connection with at least contemplated litigation. The question here, then, is whether advances of the type described are permitted within the exception of 1.8 (e). Rule 1.8 (e) permits a lawyer to advance (or pay if the client is indigent) only "court costs and expenses of litigation." This narrow exception recognizes that without an advance of costs of litigation clients might be unable to seek legal redress of injuries. The exception permits such advances as are needed to avoid that result.
The Rule makes no mention of permitting a lawyer to advance other expenses such as living expenses or transportation expenses. In the absence of any express exception for rental car or similar costs, we believe that any such advance would be improper under the general prohibition of Rule 1.8 (e). Prior Disciplinary Rule 5-103 under the old Code of Professional Responsibility did differ significantly from Rule 1.8 (e) with regard to the types of costs and expenses that could be advanced.1 Applying DR 5-103, the South Carolina Supreme Court indicated in 1978 that loans to clients were impermissible unless "confined to a permissible guarantee of the expenses of litigation including such items as court costs and expenses of preparing a case for trial. "In re Reaves, 250 S.E.2d 329, 330 (1978). Costs of a rental car would not appear to be of the type contemplated by the Court as permissible under old DR 5-103, and we find no language in the current Rules to suggest a different result following their adoption.
1 DR 5-103 provided in relevant part as follows: While representing a client in connection with contemplated or pending litigation, a lawyer shall not advance or guarantee financial assistance to his client, except that a lawyer may advance or guarantee the expenses of litigation, including court costs, expenses of investigation, expenses of medical examination, and costs of obtaining and presenting evidence.
The main difference between DR 5-103 (B) and Rule 1.8 (e) is that Rule 1.8 (e) permits costs to be advanced on a contingent basis.