In the midst of this downturn in the economy, lawyers must also be concerned about their trust accounts too? Here's a post noted by Marcia Oddi at the Indiana Law Blog:
Law - "Lawyers worry about liability if banks holding client trust accounts fail" By Marcia Oddi on General Law Related
And this is not the only story on the internet on this topic, eg:
Hot Topic: Are Lawyers Liable for Client Trust Accounts at Failed Banks? from the ABA Journal
By Martha Neil
If the bank holding my client trust funds fails, could I be held responsible?
That is the question many attorneys are now asking bar associations after the recent failure of California-based IndyMac Bank, and the answer appears to be a qualified yes, according to the National Law Journal.
Disciplinary authorities in a number of states say they won't punish lawyers if the funds are held in an Federal Deposit Insurance Corp.-insured bank account at a bank that isn't obviously unstable, according to the legal publication. However, there could be an issue if the amount in the account exceeds the FDIC-insured limit, which is currently $250,000. (The safest course is to hold no more than $250,000 at any one FDIC-insured bank.)
And civil litigation is always a possibility, as far as unhappy clients are concerned, the NLJ points out. "A New York lawyer was once sued when a bank failed, taking client funds with it. With that in mind, bar counsel are cautioning lawyers to consult their insurance carriers and 'take reasonable precautions.' "
Related coverage:
The Lawyer: "Law Soc advises on client money held in insolvent banks"
- If Your Bank Goes Under, Are Your Clients’ Trust Account Deposits Fully Insured?
James M. McCauley, Ethics Counsel
Virginia State Bar
July 30, 2008
Here is a question that makes lawyers very nervous as the list of failed banks1 and banks on the "watch list" grows: Could a lawyer be liable if the bank that held a client's trust funds went under? After reading news articles about the recent collapse of Pasadena-based mortgage lender IndyMac Bank, lawyers are making inquiries on state bar ethics hotlines. With financial institutions recognizing losses on their sub prime loan portfolios, increasing mortgage foreclosures and steeply declining bank stock prices, concerned lawyers are making inquiries about the security of IOLTA/trust accounts in federal and state chartered banks.
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