Fort Lauderdale Personal Injury Lawyers Wonder about Clients Funds If Bank Fails
A Fort Lauderdale personal injury attorney recently wondered about whether he would be responsible for a client’s trust account if a bank failed. Banks are failing at an alarming rate and lawyers who are holding client’s money are wondering if they are going to be liable for their client’s funds if the bank fails.
Lawyers have been flooding bar associations with questions about whether they are responsible for client’s trust accounts if the bank fails. The consensus of most bar associations is that the lawyers must be cautious about where they hold clients’ funds, making sure their Federal Deposit Insurance Corp-insured, (FDIC) in other words a solid bank. Opinions vary on whether moneys should be split up into different banks to take advantage of $250,000 insured deposits.
According to interviews and research with a variety of bar associations around the country, including those in California, Florida and Virginia, lawyers should not worry about sanctions or disciplinary actions if a bank failure leads to the loss of a client’s funds, provided the lawyer chose an FDIC-insured, stable bank.
Fort Lauderdale personal injury lawyers are concerned about civil liability, which is another matter altogether. A New York lawyer was once sued when a bank failed, taking its clients funds with it. With this in mind, bar counsel are cautioning lawyers to consult their insurance carriers and “take reasonable precaution.”
Elizabeth Tarbert, ethics counsel for the Florida Bar, says “there is no specific ethics opinion concerning what to do if a bank fails. Nevertheless, lawyers must act prudently and determine what kind of institution (they are) dealing with, what is its reputation and its financial stability, to the extent they can. Unfortunately, sometimes bank failures are very sudden and they keep them pretty quiet.”
A South Florida personal injury lawyer knows of one of the few cases of a lawyer being sued for legal malpractice after losing at client’s money when a bank failed which occurred back in 2003. In that case, an attorney who represented the seller of two Manhattan apartments deposited the proceeds in his firms trust account. The bank fell through and the FDIC was named the receiver. The buyer sued the clients who cross claimed the lawyer for alleged negligence. Ultimately a New York appellate court held the lawyer not responsible for knowing about the bank’s shakiness.
