SBM - State Bar of Michigan


January, 1983


    Where a client is entitled to benefits under the no-fault automobile insurance act, a lawyer has a duty to advise the client that the claim may be initiated and recovered from the client's no-fault carrier without assistance from a lawyer. A modest hourly charge for such advice is not prohibited.

    Where the client, after being fully informed, knowledgeably elects to have the lawyer process the client's claim, and benefits are voluntarily paid by the client's no fault carrier, a fee predicated on an hourly rate, or a contingent fee reasonable under all the circumstances, is proper.

    References: MCPR DR 1-102(A)(4), DR 2-106(B)(1) through (8).


A lawyer asks whether it is proper to charge a client a "statutory fee" for recovery of no-fault damages voluntarily paid by the client's insurance carrier.

The committee interprets the term "statutory fee" to mean a fee permitted by Michigan Supreme Court Administrative Rule 928.

MCPR Canon 1 requires all lawyers to assist in maintaining the integrity and competence of the legal profession. MCPR DR 1-102(A) states:

    "(A) A lawyer shall not:

      ". . .

      "(4) engage in conduct involving dishonesty, fraud, deceit, or misrepresentation."

A lawyer has a fiduciary duty to fully advise a client of all legal remedies for recovery of damages for personal injury, including benefits which may be initiated and recovered from the client's no-fault carrier without assistance from a lawyer. Failure to inform the client that the client need not utilize the lawyer's services to recover no-fault benefits to which the client is clearly entitled violates MCPR DR 1-102(A)(4).

In Op 115, which interpreted the former Canons of Professional Ethics, a lawyer was required to inform the client of the alternatives of receiving compensation under the Workmen's Compensation Act or initiating a suit against the tort-feasor for damages in a court of law. The opinion says:

    "If the lawyer, recognizing his inability to charge more than a nominal fee for his advice that the widow accept the benefits of the Workmen's Compensation Act, advises suit at law for purposes of personal profit, his conduct would be shockingly unethical."

It is therefore clear that a lawyer must fully and frankly inform the client of available alternatives, including advice that the client may wish to process the no-fault claim without lawyer assistance.

After the lawyer has fully informed the client of his or her right to obtain no-fault benefits without the services of a lawyer, and the client, for whatever reason, knowledgeably elects to have the lawyer process the claim, what may the lawyer reasonably charge when the insurance carrier then pays the benefits voluntarily? The No-Fault Act permits a court to order an insurer to pay its insured's lawyer's fees when the insurer has improperly withheld or delayed payment of no-fault benefits. But the Act does not address the underlying question of reasonable compensation. The subject is more appropriately governed by MCPR DR 2-106(A) and (B), which state in part:

    "(A) A lawyer shall not enter into an agreement for, charge, or collect an illegal or clearly excessive fee.

    "(B) A fee is clearly excessive when, after a review of the facts, a lawyer or ordinary prudence would be left with a definite and firm conviction that the fee is in excess of a reasonable fee . . . ."

Factors for the lawyer to consider as guidelines in determining the reasonableness of a fee are spelled out in MCPR DR 2-106(B)(1) through (8):

    "(1) The time and labor required, the novelty and difficulty of the questions involved, and the skill requisite to perform the legal service properly.

    "(2) The likelihood, if apparent to the client, that the acceptance of the particular employment will preclude other employment by the lawyer.

    "(3) The fee customarily charged in the locality for similar legal services.

    "(4) The amount involved and the results obtained.

    "(5) The time limitations imposed by the client or by the circumstances.

    "(6) The nature and length of the professional relationship with the client.

    "(7) The experience, reputation, and ability of the lawyer or lawyers performing the services.

    "(8) Whether the fee is fixed or contingent."

Where the lawyer advises the client of a right to process a no-fault claim without a lawyer's assistance and the client elects to do that, the prevailing attitude appears to be that the lawyer would not charge any fee. However, the committee believes that it would not be unethical to charge the client some modest hourly rate for the advice rendered.

Where the client knowledgeably elects to have the lawyer process a no-fault claim, after being informed of the right to do it on his or her own, and the insurer then pays the claim, the committee believes that a fee for services bases on a hourly rate or a contingent fee, if reasonable under all the circumstances, would be appropriate.