When your attorney commingles funds

At Lange Law Corporation in California, we know that when you hire an attorney, you expect that (s)he is trustworthy, ethical and competent. We also know that you do not expect your attorney to say or do anything that could harm you or your case. Most attorneys live up to these expectations every day. Occasionally, however, an attorney makes a mistake and commits malpractice.

FindLaw explains that your attorney must maintain at least two separate bank accounts: an operating account for the firm’s earned fees and a trust account for such things as retainers received from clients but not yet earned, settlement or judgment amounts on behalf of clients, or other monies that do not belong to the firm. You may not realize that when you pay your attorney a retainer, that money must initially go into his or her trust account because (s)he has not actually earned your retainer yet. The same is true of any settlement, judgment or other monies (s)he receives on your behalf.

Under no circumstances is your attorney allowed to commingle trust account finds with his or her operating or personal funds. Many attorneys, however, do so, usually by mistake.

Fiduciary duties

While your money is in your attorney’s trust account, (s)he has the following fiduciary duties to you:

  • To keep your funds secure
  • To keep them separate from his or her operating account or any personal account
  • To notify you when (s)he receives your settlement, etc.
  • To appropriately disburse your funds to you and the others to whom they are owed
  • To keep accurate records of all receipts and disbursements

Malpractice insurance

Should you discover that your attorney wrongfully commingled your funds with his or her own, whether by mistake or deliberately, you have the right to sue for malpractice. His or her professional liability insurance, i.e., malpractice insurance, covers any negligent acts (s)he commits. It is possible that (s)he also has a crime insurance policy that covers any fraudulent acts (s)he commits, although few attorneys have this type of insurance. If your damages exceed the limits of whatever policies your attorney has, (s)he is personally responsible for paying you the balance.

For more information about this subject, please visit this page of our website.