Rule 1.15 in California.

This material describes legal and ethical considerations for attorneys regarding medical liens in personal injury cases in California. ● Attorneys have ethical and legal obligations to protect the interests of third parties, including medical lienholders, when they hold funds for the benefit of a client. ● Rule 1.15 of the California Rules of Professional Conduct outlines the ethical duties of attorneys regarding safekeeping client funds and property. This includes funds held for third parties to whom the attorney owes a contractual, statutory, or other legal duty. ● An attorney's legal obligations can arise from both express liens, created by contract, and equitable liens, which arise from principles of fairness. ● Case law in California provides guidance on equitable liens, with some cases finding that an attorney can be held liable for disbursing funds without satisfying a medical lien, even if the attorney was not a party to the lien agreement. ● The seminal case Zerin v. Farmers Insurance Exchange emphasizes that a mere promise to pay from a specific fund is insufficient to create an equitable lien. Equitable considerations, like detrimental reliance or unjust enrichment, are also necessary. ● When an attorney signs a lien agreement with a medical provider, they are contractually obligated to protect the lienholder’s interest. If a conflict arises between the client and the lienholder, the attorney should consider interpleading the funds. ● If only the client signs a lien agreement, whether the attorney has a legal or ethical duty to protect the medical lienholder’s interest is a fact-specific inquiry. Factors to consider include the relationship between the attorney and the provider, any promises made by the attorney, and whether the provider forwent other remedies in reliance on the attorney's representation. ● Attorneys should advise their clients about the implications of treating on a lien. This includes explaining the potential impact on medical damages, particularly in light of cases like Howell and Pebley, which address the limits on recoverable medical expenses. ● Attorneys should also caution clients against treating on a lien when the provider accepts their health insurance, as this could undermine arguments for seeking treatment outside of the insurance plan. This material also provides an overview of various types of liens that attorneys may encounter, including contractual liens, statutory liens like those arising from Medi-Cal or Medicare, and equitable liens. The case McCafferty v. Gilbank illustrates how an attorney can be held liable for conversion if they disburse settlement funds without honoring a valid equitable lien. The attorney in this case was found to have wrongfully exerted dominion over the plaintiff's share of the settlement proceeds, which were subject to an agreement that created an equitable lien.