Proposed change to Michigan rules on lawyer referral fees is terrible for accident victims

I recently discussed the recent interview I had with Michigan Lawyers Weekly about the proposed amendment to rules governing referral fees between lawyers. If passed, this rule would limit referral fees to 25 percent, among other harmful changes.

The Michigan Supreme Court clerk is taking comments on the proposal until Sept. 1, 2011. They can be sent by email to MSC_clerk@courts.mi.gov, or in writing to: P.O. Box 30052, Lansing, MI 48909. This is what I wrote:

The Michigan Supreme Court is considering changing a rule change that will significantly harm the quality of legal representation in Michigan, and will certainly harm the public that we as lawyers have sworn to represent.

The proposed change to Rule 1.5 of the Michigan Rules of Professional Conduct:
1. Is unnecessary.
2. Seeks to poorly address a problem that does not yet exist in Michigan.
3. Seeks to regulate the arms-length contractual agreement made between lawyers.
4. And, most important of all, it significantly harms the unsuspecting public in need of legal help.
5. It also harms the public by creating a perverse financial disincentive for lawyers to NOT refer cases to subject matter experts, but to handle these cases themselves.

There seems no reason for this proposed rule change to MRPC 1.5 other than as a boondoggle for lawyers who are less qualified to provide quality legal representation on matters that they should be referring out to injury attorneys better able to provide quality legal representation. This proposed rule also creates a strong financial disincentive for the referring lawyer to refer a case to a specialist, and it will result in harming the public and diminishing the quality of legal representation in this state.

The public policy behind this proposed rule change could not be worse.

The rule change being considered would regulate how Michigan lawyers refer cases to other Michigan lawyers and cap the attorney referral fee to 25 percent.

We as lawyers in the state of Michigan have an important interest in protecting the public and ensuring the public receives the best legal representation possible. This proposed rule change to MRPC Rule 1.5 would damage the quality of legal help and harm unsuspecting members of the public, by making it harder for Michigan lawyers to refer cases to recognized subject experts who, by virtue of experience, demonstrated results, and legal expertise, and receive referrals from other lawyers.

Again, this proposed rule would significantly harms the unsuspecting public in need of legal representation by making it harder for lawyers to refer cases to legal experts. The rule has a number of  unnecessary and bureaucratic legal disclosure requirements. These disclosure rules would create a dampening effect that will make it awkward for lawyers to connect clients with those lawyers best able to serve their interests. It will be extremely awkward for many injury attorneys, especially in the beginning of a case and new attorney-client relationship to explain to a new client why they feel the client would be better served with a subject matter specialist. Instead of referring these cases out to lawyers better able to help the client, more lawyers will choose to keep cases they would have otherwise referred to other lawyers. It is the unsuspecting client who is harmed.

The legal profession should be making it easier to have lawyers connect clients with those lawyers best able to help them, and who have the most subject matter expertise and experience. This proposed rule change instead makes it harder.

Yes, contingent fees between lawyers and the public should be – must be –  regulated.  We have a legitimate and important interest in preventing abuse, and as a professional organization, we should seek to protect the public from abuse.  An attorney-client contingent fee agreement that is signed between a client and a lawyer should have safeguards so if a client is injured, or vulnerable, or unsophisticated, he or she is protected.

This proposal, however, seeks to regulate the contractual relationship among lawyers. It seeks to impose regulation on a voluntary agreement negotiated freely between two attorneys. These referral agreements should reflect the skill of the attorney being referred the case, the underlying complexity and cost of the case, and the nature of the attorneys relationship to each other. Michigan lawyers should be able to enter into a private contract based upon these, and other factors.

Moreover, this unnecessary regulation seeks to poorly addresses a problem that does not even exist in Michigan.

Who is this proposed rule intended to protect?  The lawyer who probably shouldn’t have signed the case to begin with, or the unsuspecting public? It is fiction to believe in a tough and competitive legal world, that a lawyer won’t sign a case he probably would otherwise have referred to another lawyer, even if the client would have been far better served by that lawyer referring the case to an expert and receiving an attorney referral fee.  Speaking of fiction, this proposed rule change sounds like something out of Ayn Rand’s “Atlas Shrugged.”  Perhaps we should call it the “Equal Opportunity and Full Employment Act for Less Qualified Lawyers”?

Limiting the maximum referral fee to 25 percent of the amount recovered creates a direct adverse financial incentive for the referring lawyer. We are creating an economic incentive for injury attorneys to keep cases because by capping the referral fee to 25 percent, that lawyer makes just as much money if he keeps the case as he would if it had been referred out, even if the client recovers less than half! The money the referring lawyer receives is the same, but the client (and innocent public in need of legal representation) has now received one-half to one-third the amount he or she should have received if the mater had been referred to a more qualified lawyer to handle the case.

This rule only hurts the public, and it only helps lawyers less qualified to handle legal matters that they should be referring out to more qualified lawyers.

These cases should be referred to a specialist.  Yes, a specialist!  For it is time for the Michigan Supreme Court to change its out-dated rules prohibiting attorneys from indicating they specialize in a specific area of law. It is time we recognize what lawyers in Michigan do every single day – which is they refer cases to lawyers that specialize in that area of law.

Our ethical rules are increasingly at odds with a legal world that is ever more complex, more fragmented, and more specialized with every passing day. We should be encouraging lawyers to connect the public with those lawyers who specialize in that area of law, because it is the client who is best served. We should not be ignoring the increasing complexity of law today, or trying to enforce rules that were created for a by-gone era of general practitioners. And we certainly should not be creating financial disincentives that prevent the public from receiving the highest quality of legal representation possible.

Our mission is to serve the public, not ourselves. This rule change only serves those lawyers who should have referred out the case and received an attorney referral fee by putting the client’s interest first.

- Steve Gursten is one of the nation’s top injury attorneys. He is head of Michigan Auto Law and has received the highest verdict in the state for a car accident or truck accident victim in 2008, 2009 and 2010.

Related information:

No-Fault tip for injury lawyers: pick your venue for PIP cases

Three potential cases for auto accidents in Michigan

Michigan personal injury attorneys

Michigan Auto Law is the largest law firm exclusively handling car accident, truck accident and motorcycle accident cases throughout the entire state. We have offices in Farmington Hills, Detroit, Ann Arbor, Grand Rapids and Sterling Heights to better serve you. Call (800) 777-0028 for a free consultation with one of our injury attorneys.

Michigan Auto Lawyers

Why Detroit papers are falling for proposed elimination of Michigan’s No-Fault insurance law

This is a blog (or rant) I wrote in response to recent editorials by the Detroit News and Detroit Free Press promoting slashing No Fault benefits in exchange for vague promises of savings from the insurance industry. It goes beyond the fact that we’ve heard these promises before from the insurance industry - and the promised savings have never materialized (in fact, premiums have only gone up). It also goes beyond the fact that both Detroit newspapers are currently tilting “conservative” and leaning Republican in their latest reincarnations.

These editorials are about the pending Senate bills that would dismantle No-Fault insurance benefits for car accident victims, in exchange for supposedly saving drivers money with their insurance premiums. Before Michigan’s No-Fault insurance system, which the Insurance Institute of Michigan has actually called the “best auto insurance coverage in the country,” gets turned on its head, a lot more needs to be known about the proposed changes and whether they’re  worth considering.

By saying they’re making Michigan auto insurance rates more affordable, the Michigan auto insurance industry, through its advocates in the Legislature, has chosen to demonize the crown jewel of Michigan’s No-Fault system: unlimited, lifetime medical benefits for seriously or catastrophically injured auto accident victims.

Our auto insurance industry is playing a “smoke and mirrors” game with people of Michigan, trying to convince them the reason they’re paying so much for auto insurance is because of the medical benefits guarantee in the No-Fault law, which the same auto insurance industry lobbied, badgered and bullied the Michigan Legislature into passing more than 30 years ago.

The real reason Michigan drivers pay so much for auto insurance is because insurance companies force them to do so. No one is asking why Michigan’s insurance companies enjoy the highest profitability margins in the nation. If Michigan auto insurance rates are unacceptably high, that’s because auto insurance companies choose for them to be high. These companies – and the companies alone – determine the premium price they’re going to charge auto insurance customers.

If Michigan had an insurance commissioner who had the power to regulate the amount of profits insurance companies can make for selling a product that our law requires drivers to purchase, these rates would significantly drop.  I don’t hear the insurance company lobbyists, or the Republicans they contribute so much money to in the Michigan Legislature, asking for expanded power for the Michigan insurance commissioner to regulate insurance company profits in this state.

So before the Michigan auto insurance industry gets away with gutting “the best auto insurance coverage in the country,” we need to know:

•    More about why the insurance industry is charging Michigan drivers so much for auto insurance,
•    Whether the proposed “gutting” of No-Fault benefits has any chance of actually saving Michigan drivers money,
•    Or whether this is all about slashing expenses and boosting profits for Michigan’s deep-pocketed insurance industry.

I propose that before anything more is done on their bills to dismantle Michigan’s No-Fault system, our auto insurance industry should provide answers to the following questions:

1. Are you willing to settle for less profits in order to make auto insurance more affordable for everyone? If so, how much less?

2. To keep Michigan auto insurance affordable for everyone and to protect Michigan drivers from ever-increasing insurance rates, are you willing to have your prices regulated by the insurance commissioner or capped (just as you are urging the Legislature to cap the fees that doctors can charge when treating Michigan auto accident victims)?

3. You insist that the cost of the average paid claim for No-Fault benefits (also called personal injury protection benefits (PIP) benefits) was $36,425 in 2010. But how many paid PIP claims were there in 2010? And how does the cost associated with those paid claims compare with the revenues from PIP premiums written and collected during 2010?

4. If the average paid claim for personal injury protection benefits is $36,425, then in how many years will it exceed the minimum PIP Choice limit of $50,000? (If your calculations are correct that the cost of the average paid PIP claim has tripled since 2000, then we can expect the average paid PIP claim to hit nearly $110,000 by 2020, right?)

5. Are you willing to guarantee in writing (perhaps as amendments to bills currently pending in the Michigan Senate) exactly how much Michigan drivers will save should your proposed No-Fault choice policy limits become law?

6. Even if Michigan drivers saved 10 percent to 30 percent on their auto insurance rates as a result of your proposed No-Fault changes, wouldn’t they still be paying some of the highest rates in the country? For instance, based on the figures released by Insure.com, a 10 percent savings would put Michigan just behind Louisiana with the country’s second highest rate. And a savings of 30 percent would put Michigan just after Connecticut with the country’s 12th highest rate.

7. If the goal is savings for drivers, why the huge recent bonuses to insurance company execs?

8. How will any of these proposals make any meaningful difference when vehicle damage is currently over 50 percent - and some say closer to 60 percent - of insurance payouts in this state?  Wouldn’t this be a better place to make meaningful changes before taking away critical protections for victims of traumatic brain injury and spinal cord injury?

Once Michigan’s auto insurance industry provides answers to those questions, everyone will have the information we all need to have a meaningful discussion about the cause of Michigan’s high auto insurance prices and whether gutting “the best auto insurance coverage in the country” is really the best way to bring those prices down.

- Steven Gursten is recognized as one of the nation’s top insurance attorneys handling serious auto accident lawsuits. He writes about insurance company abuse and the Michigan No-Fault laws, and is available for comment.

Related information:

Show us the money from proposed changes to our No-Fault law

Three potential cases for Michigan auto accidents

Insurance attorney videos: No-Fault benefits and advice

Michigan Auto Law is the largest law firm exclusively handling car accident, truck accident and motorcycle accident cases throughout the entire state. We have offices in Farmington Hills, Detroit, Ann Arbor, Grand Rapids and Sterling Heights to better serve you. Call (800) 777-0028 for a free consultation with one of our No-Fault insurance attorneys.

Michigan Auto Lawyers

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Teenage texting ban proposed to reduce Chicago auto accidents

Illinois car crash lawyers at Abels & Annes are very aware of the issues and dangers involved with distracted driving. We are currently in the process of attempting to negotiate a settlement on behalf of a pedestrian that was injured by a distracted driver. The defendant's cell phone rang, and as he tried to locate the device he lost control of his car and drove up onto a sidewalk, striking our client.

Now in an effort to reduce Chicago car crashes, a group of Aldermen are proposing new legislation that would require cell phones sold in the city be equipped with technology that would give parents the option to disable texting for their teen drivers. NBC News reported that Ald. Ed Burke (14th Ward) announced the proposed legislation on Wednesday. He says it is a tough new measure and he wants the law to come into effect for all cell phones bought after January 1, 2012.

Retailers that sell phones without the text blocking option would face fines up to $1000. Ald. Anthony Beal, Michelle Harris, Richard Mell and Ray Suarez are also supporting the proposal.

Yahoo! News reports that texting behind the wheel has become a major issue throughout the United States as motorists (especially teenage drivers) become distracted while driving and texting at the same time. The article goes on to say that a University of Utah study found that texting while driving is more dangerous than drunk driving. Motorists are four times more likely to cause a collision while intoxicated or using a cell phone, but they are eight times more likely to be involved in an accident while texting.

The Utah study also found that over 50% of teens admitted texting sometimes while operating a vehicle, and almost 19% admitted to texting regularly. In 2009 alone, just under 5500 people died as a result of distracted driving, with just under 1000 of those deaths involving cell phone use and texting.

The City of Chicago has actually been a leader in the fight against distracted driving. In addition to this newly proposed texting law, motorists are barred from talking on their cell phones unless they're using a hands-free device. Further, teen drivers are not allowed to use cell phones or text while driving.

If you've been injured by a distracted driver in the State of Illinois, contact a Chicago personal injury attorney at Abels & Annes for free case evaluation. Call 312-924-7575 speak directly to a lawyer now.

Chicago Car Accident Lawyer

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