Ethics Opinion 306
Practicing Law While Simultaneously Selling Insurance
* [NOTE: See how Opinion 306 has been substantively affected by the amendments to the D.C. Rules of Professional Conduct that became effective on February 1, 2007]
A lawyer who also is a licensed insurance broker may sell insurance products to the general public, provided that the lawyer fully complies with the Rules of Professional Conduct applicable to lawyers acting in non-lawyer capacities. When a lawyer is selling insurance products to her clients, she must ensure: (1) her own professional judgment on behalf of the client will not be adversely affected by the transaction; (2) the terms of the transaction are fair and reasonable to the client; (3) the client is advised of the right to seek independent counsel; (4) the client has an opportunity to seek independent counsel; (5) the client is advised of the lawyer’s possible conflict of interests and attendant possible adverse consequences; and (6) the client provides written consent to the transaction.
- Rule 1.6 (Confidentiality of Information)
- Rule 1.7 (Conflict of Interest: General Rule)
- Rule 1.8 (Conflict of Interest: Prohibited Transactions)
- Rule 8.4 (Misconduct)
The inquirer is a lawyer who also holds a license as an insurance broker. Recently, the inquirer, a member of the District of Columbia Bar, left government service and announced her intention to engage in the private practice of law. The inquirer plans to practice law and sell insurance products to both clients and the general public. The inquirer requested our advice concerning whether the Rules of Professional Conduct allow a lawyer to practice law and sell insurance simultaneously from the same office. The inquirer also asked whether it was ethical for her to offer to sell insurance to clients who had retained her for legal services.
This Committee previously has opined that “[t]he Rules of Professional Conduct erect no bar to a lawyer engaging in another business, separate from his or her law practice, so long as the lawyer’s engagement in that business does not result in violations of applicable provisions of the Rules.” D.C. Bar Op. No. 226 (1992) (citing e.g., Rules 1.3 (duty of zealous representation); 1.7(b)(4) (professional judgment adversely affected by lawyer’s responsibility to third party or lawyer’s own financial interests); 1.8(a) (transactions with client)). We also have noted that a lawyer performing multiple professional roles (i.e., lawyer and broker) with respect to a single transaction should comply with applicable provisions of the Rules of Professional Conduct regardless of which “hat” she is wearing in particular aspects of that transaction. See D.C. Bar Op. No. 226.
When the inquirer is selling insurance to non-clients, she is not functioning as a lawyer or dealing with individuals whom she has represented as a lawyer. Accordingly, the inquirer must ensure the client understands that she is acting exclusively as an insurance broker and not as a lawyer in the insurance transaction. As a member of the Bar, however, the inquirer must still comply with certain Rules of Professional Conduct even though she is selling insurance instead of practicing law. The relevant Rules of Professional Conduct would be those that apply to lawyers acting in non-lawyer capacities. See, e.g., Rule 8.4 (lawyer may not “[e]ngage in conduct involving dishonesty, fraud, deceit, or misrepresentation”).
Further, when selling insurance products to non-clients, the inquirer should ensure that an attorney-client relationship is not inadvertently created. The prospective purchaser of insurance products may know that the inquirer is a lawyer, in part, because insurance will be sold from a law office. The prospective purchaser also may have or may indicate an expectation that the inquirer will bring her legal judgment to bear in recommending insurance products. Under either circumstance, the inquirer should inform the prospective purchaser that she is not functioning as a lawyer and will not be exercising professional judgment as a lawyer on behalf of the purchaser.
If the inquirer sells insurance products to her client, she is entering into a business transaction with the client. Rule 1.8(a) provides:
(a) A lawyer shall not enter into a business transaction with a client or knowingly acquire an ownership, possessory, security, or other pecuniary interest adverse to a client unless:
(1) The transaction and terms on which the lawyer acquires the interest are fair and reasonable to the client and are fully disclosed and transmitted in writing to the client in a manner which can be reasonably understood by the client;
(2) The client is given a reasonable opportunity to seek the advice of independent counsel in the transaction; and
(3) The client consents in writing thereto.
Accordingly, in selling insurance products to her client, the inquirer must ensure that the terms of the transaction are fair and reasonable to the client and fully disclosed and transmitted to the client in writing. The inquirer also should advise the client of the client’s right to seek independent counsel. Next, the inquirer must give the client an opportunity to seek the advice of an independent attorney concerning the terms of the insurance transaction. The matter in which the client is given an opportunity to seek the advice of independent counsel may vary depending on such factors as the sophistication of the client, the magnitude of the transaction, and the client’s certitude with respect to the need to consult with independent counsel. Cf. Comments  &  to Rule 1.7. The inquirer then must get the client’s written consent to the transaction.
In addition to complying with Rule 1.8(a), the inquirer also must comply with Rule 1.7(b)(4) when selling insurance products to her clients. Rule 1.7(b) provides that “a lawyer shall not represent a client with respect to a matter if: . . . (4) [t]he lawyer’s professional judgment on behalf of the client will be or reasonably may be adversely affected by the lawyer’s responsibilities to or interests in a third party or the lawyer’s own financial, business, property, or personal interests.” However, Rule 1.7(c) allows a lawyer to represent a client despite a conflicting financial or business interest “if each potentially affected client provides consent to such representation after full disclosure of the existence and nature of the possible conflict and the possible adverse consequences of such representation.”
In order to comply with Rule 1.7(b), the inquirer should not recommend or enter into a business transaction with a client unless she concludes that her professional judgment on behalf of the client will not be adversely affected by the transaction. See Comment  to Rule 1.7. The inquirer must be careful that her ability to make a profit on the sale of insurance does not cloud her professional judgment as to whether insurance is really needed by the client. See N.H. Bar Op. No. 1998-99/14 (2000). In this regard, the New York State Bar concluded that a lawyer engaged in estate planning may not recommend or sell life insurance products to the lawyer’s estate planning clients if the lawyer has a financial interest in the sale of the particular products. The New York State Bar reasoned that under such circumstances the lawyer’s financial interest would be reasonably likely to interfere with the lawyer’s independent professional judgment in advising the client how best to satisfy his or her financial needs regarding trust and estate planning. See N.Y. State Bar Op. No. 619 (1991).
Even when the inquirer concludes that her professional judgment on behalf of the client will not be adversely affected by the transaction, the inquirer should not recommend or enter into the business agreement without full disclosure to the client of the inquirer’s own interest in the transaction so that the client can make a fully informed choice. Such disclosure should include the nature and substance of the inquirer’s interest in the insurance product offered (including the fact that the lawyer will be earning commissions, discounts, or other benefits from the insurance underwriter or any other third party), alternative sources for insurance services, possible adverse consequences of the inquirer’s representation, and sufficient information so that the client understands that the provision of insurance services is not a legal service. See Comment  to Rule 1.7. This disclosure does not have to be in writing or take any particular form. See Comment  to Rule 1.7. However, Athe form of disclosure sufficient for more sophisticated business clients may not be sufficient to permit less sophisticated clients to provide fully informed consent.” Id.
In the event that the inquirer’s obligation to the insurance underwriter or another party precludes full disclosure to her client, the inquirer cannot proceed with the insurance transaction. See Comment  to Rule 1.7. The inquirer also must obtain the client’s consent to proceed with the transaction notwithstanding the inquirer’s conflicting interests.
In selling insurance to her client, the inquirer also must be mindful that she still is bound by all of her obligations to the client as a result of the existing attorney-client relationship in matters other than the insurance transaction. Thus, the inquirer has, among other obligations, a duty to preserve the client’s secrets and confidences.See Rule 1.6. To the extent that the inquirer knows about the client’s secrets or confidences that are inconsistent with the provision of insurance services, the inquirer cannot reveal that information without the client’s consent unless otherwise authorized by law. However, the inquirer cannot “engage in conduct involving dishonesty, fraud, deceit, or misrepresentation.” See Rule 8.4. There may well be situations in which the inquirer is obligated to disclose certain information to the insurance company that underwrites the policies she sells. In such circumstances, it may not be possible for the inquirer to sell insurance to the client.
The views we express in this Opinion are supported by recent ethics opinions in other jurisdictions. The New Hampshire Ethics Committee advised that a lawyer who also is a licensed insurance broker may offer insurance products to her estate planning clients, so long as the clients consent in writing after full disclosure and an opportunity to consult with an independent attorney, the transaction is fair, and the lawyer satisfies herself that her professional judgment will not be clouded by her interest in selling the insurance. See N.H. Bar Op. 1998-99/14. Similarly, the New York State Bar Association Committee on Professional Ethics allowed a lawyer licensed as an insurance broker to sell insurance products to clients, provided that the lawyer’s professional judgment as a lawyer would not be impaired and the lawyer makes clear that, in selling insurance, the lawyer is not exercising professional judgment on the client’s behalf. See N.Y. State Bar Op. No. 687 (1997). The lawyer also must obtain the client’s consent, after full disclosure of the lawyer’s conflicting interest, to proceed with the transaction. Id. But see N.Y. State Bar Op. No. 619 (estate planning lawyer could not sell insurance products to client because his financial interest interfered with independent professional judgment in advising client on trust and estate matters). The New York State Bar allowed the lawyer to sell insurance products to non-clients subject to the obligation to avoid deceitful conduct and subject to solicitation rules. New York State Bar Op. No. 687; see also S.C. Adv. Op. No. 98-29 (1998) (practicing attorney with insurance license not prohibited from selling life insurance in S.C.); Utah Eth. Op. No. 146A (1995) (lawyer may sell insurance products to existing legal clients after fulfilling the disclosure and consent requirements); Mich. Eth. Op. No. RI-135 (1992) (lawyer/insurance agent may sell insurance to law clients provided that ethics rules regarding business transactions with clients, confidentiality, and conflicts of interest are observed); Ill. Adv. Op. No. 90-32 (1991) (lawyer may sell insurance products to legal clients with disclosure and consent). Therefore, the weight of authority supports our conclusion that a lawyer may sell insurance products to the general public and her client, provided that the lawyer follows certain Rules of Professional Conduct.