95-01: Living Expenses; Cost Advance to Client; Automobile Accidents; Court Costs and Expenses of Litigation

1/1995

A lawyer cannot advance rental car or car repair costs or pay an insurance deductible to or for a client in connection with pending or contemplated litigation. Such living expenses are not "court costs and expenses of litigation" that may be advanced pursuant to ER 1.8. [ER 1.8]

FACTS^[1]

The inquiring attorney's firm handles plaintiffs' personal injury actions. His clients sometimes request that he pay the cost of a rental car for them and/or to pay the collision insurance deductible for repair to their vehicles. In most cases he has been able to obtain funds for these items from either the client's insurance carrier or the tortfeasor's insurance carrier. In those cases where he has been unable to obtain funding for these items from the insurance companies, the inquiring attorney's firm has declined to advance money to the clients to pay for these items.

QUESTION PRESENTED

May an attorney advance money to a client for the costs of renting a car or paying the deductible on an insurance claim to repair a car?

RELEVANT ETHICAL ISSUES

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ER 1.8(e) A lawyer shall not provide financial assistance to a client in connection with pending or contemplated litigation, except that: (1) a lawyer may advance court costs and expenses of litigation, provided the client remains ultimately liable for such costs and expenses. . .

OPINION

Briefly, the question that the inquiring attorney presents is whether rental car charges and/or car repair charges are "costs and expenses of litigation" that may be advanced to a client. The answer to this question is no.

Transportation expenses of a client are not costs and expenses of litigation and, therefore, they cannot be advanced by the attorney. The following is an explanation of what constitutes "costs and expenses":

"Costs" are the charges that by statute a party may recover upon winning the litigation. These usually include such items as filing fees, fees for service of process, and other disbursements that are taxable and includable in the judgment. Sellers v. Johnson, 719 P.2d 476, 479 (Okla. App. 1986). The term "expenses" covers such charges as the "costs of investigation, expenses of medical examination, and the costs of obtaining and presenting evidence." DR 5-103(B). Law. Man. on Prof. Conduct 51:803 (ABA/BNA) (11-25-87).

In the Committee's Opinion 91-14 (May 8, 1991), the Committee determined that an attorney could not advance money to a personal injury client to pay for medical treatment because such an expense was not a "cost or expense" of litigation under ER 1.8(e)(1). Payments for medical treatments are payments for living expenses. The Committee determined, however, that an attorney may make a gift of money to a client. Opinion 91-14 sets forth the policies underlying the prohibition against advancing living expenses to a client. Specifically, the Opinion noted two reasons why advancing living expenses is prohibited under ER 1.8(e); 1) the attorney would then have a personal interest in the litigation that might be placed ahead of the client's interests; and 2) such an advancement might be an improper inducement to retain the lawyer. Op. at 3.

Although this Committee has not addressed the issue of whether a client's transportation costs are "costs and expenses of litigation," other jurisdictions have determined that transportation costs are living expenses that may not be advanced by an attorney. See e.g., Md. Atty. Grievance Commis. v. Kandel, Md. Ct. App., Misc. Docket (Subtitle BV No. 28, 9/12/89), 5 Law. Man. on Prof. Conduct 341 - 342 (ABA/BNA) (transportation repair expenses are not expenses of litigation).

In summary, the inquiring attorney should not advance money to a client for rental car charges and/or car repair because to do so would be in violation of ER 1.8(e)(1).

[1] Formal Opinions of the Committee on the Rules of Professional Conduct are advisory in nature only and are not binding in any disciplinary or other legal proceedings. ã State Bar of Arizona 1995

Formal Opinions of the Committee on the Rules of Professional Conduct are advisory in nature only and are not binding in any disciplinary or other legal proceedings.