100214 AKEO, 2014-4

• Case Date: October 02, 2014
• Court: Alaska

2014-4 Ethics Opinion No. 2014-4 Alaska Ethics Opinions Alaska Bar Association October 2, 2014          Lawyer's Indemnification of Opposing Parties          Questions Presented          Is it ethically permissible for a plaintiff’s lawyer, as part of settlement of the plaintiff’s claims, to agree personally to indemnify the defendant from third-party claims to the settlement funds?          Is it ethically permissible for a defendant’s lawyer to propose a condition of settlement requiring the plaintiff’s lawyer to agree personally to indemnify the defendant from third-party claims to the settlement funds?          Conclusion          A lawyer may not agree personally to satisfy third-party claims to settlement funds. With the issuance of this opinion, Alaska joins other bar associations that have concluded such agreements are ethically impermissible.^[1] Accordingly, defense counsel may not attempt to require that a plaintiff’s lawyer personally indemnify the defendant from third-party claims to the settlement funds.          Introduction          In personal injury lawsuits, it is not uncommon for various entities to have a claim to a portion of the plaintiff’s recovery. For example, a plaintiff may owe various third parties for medical expenses, including healthcare providers, insurers, and state and federal assistance programs. These third parties may hold liens against the plaintiff’s recovery from any settlement. The plaintiff must satisfy valid liens out of any settlement proceeds.^[2]          When on notice of a tort suit on the plaintiff’s behalf, lienholders may inform the defendant of the lien and threaten litigation if a settlement is made without addressing the lienholders’ interests. If a plaintiff fails to pay those liens, it is possible that a lienholder could make a claim or file suit against the defendant who settled with the plaintiff. Typically, a settlement agreement contains language where the plaintiff agrees to indemnify the defendant from such claims. Such a provision involving a promise by the plaintiff raises no ethical concerns.          However, defendants in some civil cases also have demanded as a condition of settlement that the plaintiff’s attorney, as well as the plaintiff, agrees to indemnify the defendant in the event of claims arising from liens asserted against the plaintiff’s settlement funds.          The Committee has been asked whether the plaintiff’s attorney ethically may agree to...