Here’s a set of questions we got from a workers’ comp claimants lawyer, who said that his clients’ weekly insurance checks are mailed to his office. He asked whether he should open the checks and make a record of them, and more generally what kind of records must or should be kept. He also wondered if he was obligated to send the checks on to the clients, or whether notifying them that the checks had arrived is enough. We’ll answer those questions, and more! (Full disclosure: the authors have no workers comp experience.)
Georgia Rules of Professional Conduct Rules 1.15(I)(a) and 1.15(II)(a) require lawyers to “hold” client funds by depositing them in a rules-compliant trust account, and Rule 1.15(II)(a) also requires that the funds be administered from that account. Assuming that the workers’ comp checks are 100% the client’s money,* does that mean they must be deposited into a trust account and then trust account checks written to the clients?
Not necessarily. The “hold” language may imply something slightly (though not much) longer than in with one hand, out with the other. In addition, Rule 1.15(c) requires lawyers to “promptly notify the client” upon receipt of client funds, and to “promptly deliver” the funds to the client. Together, the rules can be read to allow a narrow window for getting the received checks themselves on to the clients, bypassing the trust account. You should take “promptly” as literally as possible, however. A dictionary definition is “done without delay; immediate.”
“Records on such trust accounts shall be so kept and maintained as to reflect at all times the exact balance held for each client or third person.” Rule 1.15(II)(b). Though that applies only to funds held in trust accounts, it nonetheless expresses a sort of gold standard for dealing with these pass-through checks, substituting “amount received and delivered” for “balance held.” It seems obvious that a lawyer should keep meticulous records of the receipt and delivery of such checks, in order to ensure against loss, misdirection or allegations of theft. Whether or not technically required by the ethics rules, a lawyer should at a minimum keep a record of each check received and delivered, including the date(s) of those respective events.
If there is good reason to record more information about each check than can be determined without opening the envelope, opening it to obtain the information may be permissible, but that should be done only if the client agrees to it in advance. See Rule 1.4 (Communication), and be guided by 1.0(h)(informed consent definition) for added insurance. The best practice would be for that consent to be in writing, signed by the client.
As to forwarding the checks versus merely notifying the clients of their receipt, the answer in some cases may as a practical matter be determined by the “prompt deliver[y]” requirement of Rule 1.15(c). For example, it may be difficult, inconvenient or even impossible for some clients to pick up their checks promptly. This, again, is best dealt with as part of a clear agreement with the client before the checks start coming; with “promptly” as the limiting factor, it could be a uniform practice or one determined by client choice. For the protection of both the lawyer and the client, it would be good practice to use a mailing method that allows tracking, to have clients sign each time they pick up their checks, and to make that part of the record keeping.
As discussed in an earlier blog post, the only Georgia ethics rule specifically requiring records retention is Rule1.15(I)(a): “Complete records of such account funds and other property shall be kept by the lawyer and shall be preserved for a period of six years after termination of the representation.” Beyond that, record retention policies and practices after a case is concluded are often determined in consultation with the lawyer’s professional malpractice carrier.
For assistance with the steps for properly setting up and maintaining your trust account or developing an updated recordkeeping policy, don’t forget to contact the Bar’s Law Practice Management Program at 404-527-8772.
* If a check includes both client funds and funds owed to the lawyer or to a third party, Rules 1.15(I), 1,15(II) and 1.15(III) apply fully. Such checks must be deposited into a trust account and the funds disbursed from there.
– Bill & Natalie
DISCLAIMER: INTERPRETATIONS OF THE GEORGIA RULES OF PROFESSIONAL CONDUCT (ETHICS RULES) AND THEIR APPLICABILITY IN THIS BLOG POST ARE INFORMAL OPINIONS ISSUED PURSUANT TO BAR RULE 4-401. THEY ARE THE PERSONAL OPINIONS OF THE ASSISTANT GENERAL COUNSEL CO-AUTHOR, AND ARE NEITHER A DEFENSE TO ANY COMPLAINT NOR BINDING ON THE STATE DISCIPLINARY BOARD, THE SUPREME COURT OF GEORGIA OR THE STATE BAR OF GEORGIA.