New York State Seal
STATE OF NEW YORK
INSURANCE DEPARTMENT
ONE COMMERCE PLAZA
ALBANY, NEW YORK 12257

David A. Paterson
Governor

Eric R. Dinallo
Superintendent

The Office of General Counsel issued the following opinion on April 3, 2008, representing the position of the New York State Insurance Department.

RE: Attorney Retainer Agreement

Question Presented:

Does the proposed retainer agreement, as summarized below, constitute an attorney retainer agreement as defined in 261.1(b) of N.Y. Comp. Codes R. & Regs. tit. 11, Part 261 (2003) (Regulation 161), rather than the doing of an insurance business?

Conclusion:

Yes. The proposed retainer agreement constitutes an attorney retainer agreement as defined in § 261.1(b), and would not constitute the doing of an insurance business.

Facts:

The inquirer represents a law firm that intends to provide legal representation, through its attorneys licensed in New York, to New York physicians who seek advice regarding, and/or subjected to possible adverse review by the N.Y. State Office of Professional Medical Conduct (OPMC), the federal Medicare Quality Improvement Organization (“QIO”), the Office of Inspector General U.S. Department of Health and Human Services (OIG), the federal Occupational Safety and Health Administration (OSHA) or the federal Office of Civil Rights (OCR). The agreement provides for an advance payment of $455 per year for certain listed basic services and reasonable expenses incurred; the rendition of additional legal services at a discounted rate; and upon request, an accounting at the end of each year for the value of the retainer provided and any service provided.

The basic representation services under the program (included for the $455 fee) are as follows:

A consultation with the participating physician to determine if the physician has a legal problem with OPMC, QIO, OIG, OSHA or OCR;

Provision of up to three letters, telephone calls, or detailed legal instructions to OPMC, QIO, OIG, OSHA or OCR regarding related issues; and

Attendance of an attorney at any scheduled appearance before OPMC, QIO, OIG, OSHA or OCR.

The agreement states that $150 of the $455 cost is attributed to the letters, calls or instructions, and $150 is attributed to one attorney appearance. The agreement does not specify an allocation of the remaining $155. If the services are not fully utilized by the participating physician during the year for which they have been paid, the physician will receive educational materials and/or educational programs from the firm on any OPMC, QIO, OIG, OSHA or OCR-related subjects.

Additional legal services may be provided at specified rates, which are discounted from the usual fees that the firm charges. Other expenses, such as costs of expert witnesses, medical consultants, photocopying, or filing fees are the responsibility of the physician.

The inquirer reports that the fee is sufficient to cover the cost of rendering the basic services listed above.

Analysis:

A similar version of the retainer agreement described above was previously opined upon by the Department in Opinion of Office of General Counsel No. 00-07-16 (July 26, 2000) (“2000 OGC Opinion”). That opinion concluded that the agreement did not constitute insurance but was an attorney retainer agreement, as defined in 11 NYCRR. § 261.1(b), “so long as it was clarified that the fee did not cover multiple occurrences.” That regulation defines an “attorney retainer agreement” to mean:

(b) . . . an agreement by an individual, corporation, or other business entity to pay in advance a fee to an attorney, admitted to practice in the jurisdiction where the services are to be rendered, in order to retain or secure the right of access to the services of an attorney and for such services as may be provided in the future and disbursements related thereto, provided there is a provision for an accounting of the value of such retainer and any services provided.

An attorney retainer agreement, under which legal services are provided for a prepaid fee, does not constitute the doing of an insurance business within the meaning of N.Y. Ins. Law § 1101, so long as the services are not dependent upon the happening of a fortuitous event (as such term is defined in subsection (a)(2) of such section) in which the recipient of the services has, or is expected to have at the time of such happening, a material interest that will be adversely affected by the happening of such event. Opinion of Office of General Counsel No. 00-07-16 (July 26, 2000). Moreover, an attorney retainer agreement may provide for services that are dependent upon the happening of a fortuitous event, without constituting the doing of an insurance business, if a separate fee for each such service is charged, and the fee for the service fully covers the cost of rendition of such services including reasonable overhead. In other words, the arrangement may provide for a prearranged discount on the services, but the provider of services may not assume a risk of loss.

The 2000 OGC Opinion concluded that the initial consultation services for determining whether the physician had a legal problem were not dependent upon a fortuitous event. But the opinion concluded that services constituting the attorney’s letters and/or advice and the appearance are based upon a fortuitous event. The 2000 agreement delineated the amounts of the annual fee attributable to each of the fortuitous basic services, and concluded that such amounts covered the costs of rendition.

The proposed agreement differs from the 2000 agreement in that it does not specify the cost attributed to the consultation services. The agreement also includes an increase in the total retainer fee and the costs attributed to the letters, phone calls and legal instructions, and it changes the legal topic areas for which the legal services may be rendered. But these changes do not convert the amended agreement into an insurance contract provided that, with respect to those services that are dependent upon fortuitous events – namely, the letters and advice and the appearance – the firm charges a fee that fully covers the cost of rendition. In that light, the absence of a specific cost attributable to the consulation services is of no consequence, since the consultation services are not dependent upon a fortuitous event.

The inquirer was also informed that the proposed agreement should also clarify that the law firm will not provide the basic services for multiple occurrences such that within the year the physician is able to obtain a set of basic services for each and every instance of a matter before any of the various agencies/organizations specified in the proposed agreement. The fee reflects solely one appearance and three letters, calls, or instructions in any given contract year; any additional appearances, letters, calls, or instructions would need a separate fee charged at the time of such services covering the cost of rendition of the services.

For further information you may contact Senior Attorney Brenda Gibbs at the Albany Office.