Ethics Opinions
Iowa Supreme Court Board of Professional Ethics and Conduct
Date of Opinion:
09/08/1999
Opinion Number:
99-01
Title:
INSURANCE GUIDELINES
Opinion:
You state that in cases where an insurance company (“Insurer”) has engaged a lawyer or law firm to represent its insured, the Insurer frequently requests the lawyer to agree to a variety of requirements, usually called “Guidelines,” as a condition of the engagement. These Guidelines sometimes include requirements which: 1) specifically control how a law firm staffs a file, provide that a non-lawyer claims representative can perform tasks traditionally performed by a lawyer, set forth when and to whom the lawyer may assign various legal tasks (such as to legal assistants); determine who in the law firm can perform legal research, require a lawyer to rely upon research by an unsupervised paralegal, require prior approval for depositions or pleadings, curtail interoffice meetings of lawyers working on the file, limit written communication with the insured to a minimum, or dictate how and when specific legal tasks may be performed such as the use and type of discovery; and 2) require the lawyer to keep a time based service-log describing in detail the specific legal services rendered by the lawyer to the client and the amount of time it took to perform the service, etc. The service-log is for review by the Insurer or a third party, outside auditor in determining whether, in their judgment, the services were necessary and the time charged reasonable.
You ask whether it is proper for an Iowa lawyer to agree to, or accept or follow an engagement that requires following such Guidelines.
1)
Control of Work
- The Iowa Supreme Court has held that when an Insurer retains an attorney to represent an insured, the lawyer has an attorney-client relationship with the insured. See
Henke
v.
Iowa Home Mutual Cas. Co.
, 87 N.W. 2d 920, 249 Iowa 614 (1958); see also Formal Opinions 87-16 and 88-14. The primary question concerns who can direct and control legal services rendered by a lawyer to a client and how those services are to be delivered. The Iowa Code of Professional Responsibility for Lawyers answers the question. Only the lawyer and the client can direct and control the legal services rendered to the client. “A lawyer shall not permit a person who recommends, employs, or pays the lawyer to render legal services for another to direct or regulate the professional judgment in rendering such legal services.” DR 5-107(B). See also EC 5-1, 5-21, and 5-23. Determining the legal services necessary to represent the client and who, within the lawyer’s office renders them, are and must be solely within the province of the lawyer. In making those decisions, the lawyer must comply with DR 3-104 as well as EC 3-6 of the Iowa Code of Professional Responsibility.
2)
Outside Auditors
- Guidelines which direct and require the lawyer to keep and reveal a detailed narrative legal service-log raise both the issue of control of the lawyer’s professional judgment in violation of DR 5-107(B); and whether the attorney-client privilege is jeopardized. A lawyer is required to protect the confidences and secrets of a client and they may not generally be revealed without the client’s consent, after full disclosure. DR 4-101. Any requirement that the lawyer obtain the insured’s consent to such a disclosure creates an ethical dilemma for the lawyer. As the Washington State Bar Association has stated, “This is because it is almost inconceivable that it would ever be in the client’s best interests to disclose confidences or secrets to a third party.” WSBA Formal Opinion 195, 6/24/99. “If there is the slightest risk of embarrassment to the client or waiver of privileged information, independent counsel could have an affirmative duty to recommend against disclosure.”
Id.
It is the opinion of the Board that:
1) it would be improper for an Iowa lawyer to agree to, accept or follow Guidelines which seek to direct, control or regulate the lawyer’s professional judgment or details of the lawyer’s performance; dictate the strategy or tactics to be employed; or limit the professional discretion and control of the lawyer.
2) it would be improper for an Iowa lawyer to agree to, accept or follow such proposed service-log requirements in any form that causes the attorney-client privilege to be placed in jeopardy, if the service-log is sent to a third party. An Insurer may require a lawyer to identify the services rendered and time spent, so long as it does not control the lawyer’s professional judgment or undermine the attorney-client privilege.
Lawyers also should review DR 1-102(A), DR 5-105(C) and (D), DR 6-101(A), DR 7-101(A) and Canon 9, and their pertinent Ethical Considerations.