KPM Law Blog

A lawyer shall not “present or threaten to present criminal or disciplinary charges solely to obtain an advantage in a civil matter.”  Virginia DR 3.4(h).   The DR’s, Discliplinary Rules to the rest of civilized society, govern lawyer conduct.  This particular Rule exists because the stigma associated with criminal or disciplinary charges could override a person’s desire to pursue a rightful claim for civil relief.  But, when does advising an adversary of the potential ramifications of his actions cross the line to threatening criminal charges?

An attorney can advise his own client to pursue criminal charges against an adversary.  The typical situation arises with the bounced check.  Filing suit against a party bouncing a check leaves your client with a judgment and a lot of draconian, time consuming debt collection measures.  Advising your client that bouncing a check is a crime and suggesting to your client that he take the bad check to the Commonwealth’s Attorney does not involve threatening an adversary and probably gets better results than a civil suit.  Faced with criminal charges, the check bouncer may pay up quicker or have Court-ordered restitution as part of his sentence.  

But, how does this ethics rule impact an insurance fraud investigation?  For instance, in Virginia, all claim forms must contain a statement that “it is a crime to knowingly provide false, incomplete or misleading information to an insurance company . . .”  Va. Code Ann. §52-40.  An Examination Under Oath (E.U.O.) transcript that an insured must sign, correct and notarize may fall into the undefined term of “claim form” so, at some point, this warning must show up.  Does the examining attorney verbally advise the insured on the record of this statutory language or slap a sticker with this language on the outside of the transcript when sent to the insured for signing?   Is the attorney “threatening criminal prosecution” in violation of the Disciplinary Rule in either instance?

Advising an insured of statutorily required language does not violate the letter of the rule.  The attorney citing this language is not threatening “solely to obtain an advantage in a civil matter.”  An attorney need only to point at the statute for support for his purpose.  The attorney should explain why such language is put in the record by citing the relevant statute.

Often, after an insurer denies a claim, the adjuster demands that the attorney report the fraud to the proper authorities.  The attorney can report the crime of insurance fraud.  Reporting the crime involves communication to the authorities and not a threat directed towards the insured to gain an advantage in the claims investigation.

But, the American Bar Association actually suggests that such behavior may be acceptable.  In Ethics Opinion 90-363 the ABA determined that the Model Rules allow an attorney to threaten criminal charges to gain an advantage in a civil matter if the criminal charges relate to the civil matter, the attorney has a “well-founded belief” that both the civil and criminal charges have a reasonable basis in the law and facts of the case and the attorney does not try to improperly influence the criminal end of the case.  In fact, the ABA even allows settlement terms to include an agreement not to report criminal conduct.  The ABA makes sure to say in this Opinion that this is just their “opinion” and that everyone needs to consult their local laws and Disciplinary Rules for how to act ethically.  

Under the ABA “opinion,” pushing a Claim Withdrawal form towards an insured and suggesting that jail time is likely unless the claim is withdrawn is acceptable.  The Virginia State Bar, however, would find such conduct reprehensible and would take the threatening attorney to task, as well they should.  Insurance claims, indeed all claims, should be resolved on its merits, not by inducing fear in an insured through heavy-handed threats.