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Advisory Opinion 46

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State Disciplinary Board
Advisory Opinion No. 46
March 15, 1985

Third Party Advancing or Reimbursing an Insured (Policyholder) for the Latter's Purchase of Optional PIP Coverage

Pursuant to the provisions of Rule 4-223 of the Rules and Regulations for the Organization and Government of the State Bar of Georgia (219 Ga. 873, as amended), the State Disciplinary Board of the State Bar of Georgia, after a proper request for such, renders its opinion concerning the proper interpretation of the Code of Professional Responsibility of the State Bar of Georgia.

Factual Background: Attorney (A) represents Client (C) whose spouse was struck and killed by a van as he crossed the street. The deceased spouse had no automobile insurance, while the van driver was insured and his policy provided only basic PIP benefits. These basic benefits extended to the deceased's family and were paid out by the driver's insurance.

Eventually, a settlement of the liability claim was reached. A approached the attorney (X) who represented the driver (Y) and inquired as to whether or not his client would be willing to apply for and tender the premium for optional PIP coverage available under former O.C.g.A. § 33-34-5(B) (Ga. Code Ann. § 56-34046). X consulted with Y and advised that Y would be willing to do so but only on condition that C advance Y the amount for the additional premium and pay Y for his time in making the application for the optional coverage.

According to a recent decision by the Georgia Court of Appeals in Bailey v. Georgia Mutual Ins. Co., 168 Ga. App. 706, 309 S.E. 2d 870 (1983), "a demand for increased coverage by the policyholder is necessary before those who would be incidental or third-party beneficiaries as 'other insureds' can seek optional benefits." Thus, C and the child of the deceased pedestrian, who was not a direct policyholder, would not have legal standing to apply for and obtain those optional benefits according to the Court of Appeals' ruling.

Questions Presented:

1. May C or A advance to Y the premium amount for the optional PIP coverage?
2. May A or C compensate Y for his time in applying for and obtaining this coverage?
3. If the insurer refuses to pay the benefits and litigation results, would C be barred from compensating Y for his time and effort in pursuing the claim in court, in addition to witness and mileage fees allowed by statute? Opinion: The ethical rules presently applicable to this inquiry are EC 5-8, EC 7-28, DR 5-103(B), DR 7-109(C), and Standards 32 and 58.

The State Disciplinary Board of the State Bar of Georgia answers the questions presented as follows:

1. C or A may ethically advance to Y the premium amount of optional PIP coverage as long as A's conduct is otherwise in accordance with the requirements of Standard 32. Standard 32 provides:

While presenting 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 examinations, and costs of obtaining and presenting evidence, provided the client remains ultimately liable for such expenses. A violation of this standard may be punished by a public reprimand.

2. A or C may ethically compensate Y for his time in applying for and obtaining the optional PIP coverage, as long as A's conduct is otherwise in accordance with the requirements of Standard 32 cited above.

3. If the insurer refuses to pay the benefits and litigation results, C is not ethically barred from compensating Y for his time and effort in pursuing the claim in court, provided that the requirements of Standard 58 are observed. Standard 58 provides:

A lawyer shall not pay, offer to pay, or acquiesce in the payment of compensation to a witness contingent upon the content of his testimony or the outcome of the case. But a lawyer may advance, guarantee, or acquiesce in the payment of:

(a) expenses reasonably incurred by a witness in attending or testifying;

(b) reasonable compensation to a witness for his loss of time in attending or testifying;

(c) a reasonable fee for the professional services of an expert witness.

A violation of this standard may be punished by disbarment.



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