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by Jay Reeves |

2022 NC Formal Ethics Opinion 5


A client may retain a public insurance adjuster who will be paid a contingency fee from any recovery – and the client’s attorney can even call the adjuster as an expert witness at trial.

This is so even though attorneys are generally prohibited from paying expert witnesses a contingency fee.

That’s according to NC State Bar 2022 Formal Ethics Opinion 5, issued in October 2022.

Here is the factual inquiry underlying 2002 FEO 5:

A homeowner experiences hail damage to his real property. The homeowner enters into a contract with a public insurance adjuster licensed by the North Carolina Department of Insurance whereby the adjuster will be paid a percentage of insurance proceeds the homeowner receives. The homeowner subsequently hires Lawyer for the trial of the matter. Assuming the court would qualify the public adjuster as an expert for homeowner’s case, may Lawyer call the adjuster as an expert witness at trial?

“Yes,” the State Bar said. “While the Rules of Professional Conduct generally prohibit a lawyer from paying an expert witness a contingency fee, the contract entered into by the client and the public insurance adjuster is not governed by the Rules of Professional Conduct.”

 

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NC State Bar 2022 FEO 5

Although Rule 3.4(b) says “[A] lawyer shall not offer an inducement to a witness that is prohibited by law,” comment 3 goes on to say: “[w]ith regard to paragraph (b), it is not improper to pay a witness’s expenses, including lost income, or to compensate an expert witness on terms permitted by law.”

From the State Bar: “The common law rule in most jurisdictions is that it is improper to pay an occurrence witness any fee for testifying and that it is improper to pay an expert witness a contingent fee. Other states have opined that it is against public policy for anyone to pay a public adjuster a contingency fee…. However, in North Carolina, it is not against public policy to pay a public adjuster a contingency fee.”

Thirteen years ago, Chapter 58 of the General Statutes was amended to include Article 33A, regarding public insurance adjusters. The statute provides: “In the event of a catastrophic incident, there shall be limits on catastrophic fees. No public adjuster shall charge, agree to, or accept as compensation or reimbursement any payment, commission, fee, or other thing of value equal to more than ten percent (10 percent) of any insurance settlement or proceeds. No public adjuster shall require, demand, or accept any fee, retainer, compensation, deposit, or other thing of value before settlement of a claim. N.C. Gen. Stat. § 58-33A-60(d).”

The statute doesn’t say whether the public adjuster may testify as an expert witness.

“However, because the statute permits the client to pay the public adjuster a contingency fee based upon the outcome of the underlying case,” the NC State Bar ruled. “Lawyer is not “offer[ing] an inducement to a witness that is prohibited by law.”

SOURCE: 2022 Formal Ethics Opinion 5 | North Carolina State Bar (ncbar.gov)

 

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