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client was brought into the office to execute the insurance
settlement check for deposit into the firm's client trust
account. The client's portion of the settlement proceeds was
distributed to the client by check or in cash. If the medical
provider's bill was for more than one-third of the settlement,
contact was made to obtain the provider's agreement to accept
only the one-third amount. If the 1-year anniversary of the
accident was approaching and/or if there was no apparent ability
to settle the claim, cases were reviewed for possible litigation.
If necessary, petitioner prepared and filed a complaint.
Recording of Fee Income and Preparation of Tax Returns
By 1988, the income to petitioner's law practice consisted
primarily of insurance settlement checks from personal injury
cases. There were three major categories of insurance settlement
checks: Property damage, medical payment (med-pay), and bodily
injury. For property damage settlements, the check typically was
deposited into the firm's client trust account, and the proper
amount then was disbursed to the body shop or the client. On
occasion, a check simply was endorsed over to the body shop or
the client. Med-pay checks often were received in advance of the
final resolution of the insurance claim. Accordingly, these
checks typically were deposited into petitioner's client trust
account and were held for a considerable length of time to
determine whether the client ultimately was entitled to keep the
med-pay amount. The firm earned no fee on med-pay amounts until
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