Section 10. Definitions

The following words and terms, when used in these regulations, shall have the following meaning, unless the context clearly indicates otherwise:

"Board" means the Clients' Protection Fund Board.

"Dishonest conduct" means any wrongful act committed by a lawyer in the nature of theft or embezzlement of money or the wrongful taking or conversion of money, property or other things of value, including but not limited to, refusal to refund unearned fees received in advance where the lawyer performed no services or such an insignificant portion of service that the refusal to refund the unearned fees constitutes a wrongful taking or conversion of money.

"Fund" means the Clients' Protection Fund of the Virginia State Bar.

"Lawyer" means one who, at the time of the act complained of, was a member of the Virginia State Bar, was domiciled in Virginia, and was actually engaged in the practice of law in Virginia. The fact that the act complained of took place outside of the State of Virginia does not necessarily mean that the lawyer was not engaged in the practice of law in Virginia.

"Reimbursable losses" means only those losses of money or other property of clients of lawyers which meet the following tests:

1. The conduct which occasioned the loss occurred on or after January 1, 1976;

2. The loss must be caused by the dishonest conduct of the lawyer and shall have arisen out of and by reason of a lawyer-client relationship or a fiduciary relationship between the lawyer and the claimant;

3. The loss to be paid to any one client shall not exceed $25,000.00. For purposes of this provision, the board may regard two or more persons, firms or entities as "one client" with respect to a lawyer's dishonest conduct in handling a given matter where the facts and equities are found to justify such a conclusion; and

4. The lawyer has been disbarred or suspended from the practice of law, has voluntarily resigned from the practice of law, has died, has disappeared, has removed himself from the state and is not subject to judicial process, has been adjudicated as bankrupt, or has been adjudicated mentally incompetent, or where the loss has been certified to the board by one of the district committees of the Virginia State Bar as an appropriate case for consideration because the loss was caused by the dishonest conduct of a member of the Virginia State Bar.

The following shall be excluded from "reimbursable losses":

1. Losses of spouses, other close relatives, partners, associates and employees of lawyers causing the losses;

2. Losses covered by any bond, surety agreement, or insurance contract to the extent covered thereby; including any loss to which any bonding agent, surety or insurer is subrogated;

3. Losses of any financial institution which are recoverable under a "banker's blanket bond" or similar commonly available insurance or surety contract;

4. Losses by any business entity controlled by the lawyer;

5. Losses incurred by any governmental entity or agency; and

6. Losses occasioned by a loan or an investment transaction with a lawyer, unless it arose out of and in the course of the attorney-client relationship and but for the fact that the dishonest attorney enjoyed an attorney-client relationship with the claimant such loss could not have occurred. In considering whether that standard has been met, the following factors will be considered:

(a) The disparity in bargaining power between the attorney and the client and their respective educational backgrounds and business sophistication;

(b) The extent to which the attorney-client relationship overcame the normal prudence of the applicant;

(c) The extent to which the attorney, by virtue of the attorney-client relationship with the applicant, became privy to information as to the applicant's financial affairs; and

(d) Whether a principal part of the service arose out of a relationship requiring a license to practice law.

Historical Notes

Derived from VR167-01-201 § 1, eff. February 22, 1992; amended, eff. June 17, 1993.

Statutory Authority

§ 54.1-3910 of the Code of Virginia and Part 6, §IV, Paragraph 16 of the Rules of the Virginia Supreme Court.