Fiduciary Duty to Third Parties: Estate Planning and Medical Liens

An increasing number of malpractice claims involve a breach of fiduciary duty to a non-client. These cases arise most often in the context of estate planning. But they may arise in any situation where the lawyer has a duty to protect the interests of a third party.

In some cases the client may pressure the lawyer into doing something that results in a breach of fiduciary duty. Although the client is in charge of making the final decisions about the case, the lawyer has a responsibility to refuse to follow a client’s instructions if those instructions will result in the lawyer committing professional misconduct or violating the law.

1) Estate Planning

Lawyers Mutual handled a claim alleging breach of fiduciary duty that had its origins in the insured providing limited legal assistance to a client who appeared to be unable to afford adequate representation. The lawyer met with an elderly client at the residence of one of her relatives. The relative lived in a mobile home with modest accommodations.

The client asked the lawyer to draft a will that would provide her children with some money during their lifetimes, with the remainder ultimately going to the grandchildren. The lawyer explained to the elderly client that she would need to set up a trust that would give the income to the children while they were alive and leave the corpus to the grandchildren. He told her he could set up this trust for a fee of one thousand dollars. The elderly client said she could not afford such an exorbitant fee and asked the lawyer to just write up something for her so she could prepare her own will. The lawyer and client agreed that he would do this for one hundred dollars, which was all that the client could apparently afford.

The lawyer proceeded to give the client a few standard trust forms to fill out and told her to put her name on every form and to delete any paragraphs she did not want. The client agreed. When the client later died it was discovered that her estate was worth seven million dollars! The will was submitted to probate, and the clerk of court could not make heads or tails of what the elderly client had intended. The trust that was supposed to be set up for the grandchildren was ineffective, and the assets consequently passed directly to the children. The grandchildren, who had been told by the elderly client of their anticipated fortune, sued the lawyer for their losses.

2) Medical Provider Liens

Recent case law makes it clear that an attorney who fails to protect a valid medical lien in accordance with N.C. Gen. Stat. § 44-50 can be held liable for the medical provider’s losses.  See Triangle Park Chiropractic v. Battaglia, 139 N.C. App. 201, 532 S.E.2d 833 (2000), review denied, 352 N.C. 683, 545 S.E.2d 728 (2000) N.C. Gen. Stat. § 44-50 imposes a duty on attorneys who collect personal injury settlements to protect liens asserted by medical providers.

A lien is perfected under N.C. Gen. Stat. § 44-49 when the attorney requests and receives without charge medical records AND a written notice to the attorney of the lien claimed. In cases where the amount demanded for medical services is in dispute, however, the attorney is not compelled to make payment on the claim until the dispute is resolved. See N.C. Gen. Stat. § 44-51.

Since this area of the law is particularly complicated, you should take time to familiarize yourself with the relevant statutory sections and case law.

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