When an insurer asks defense counsel to send the insured's detailed legal bills to an outside billing auditor, may the lawyer comply without the insured's consent?

Plain-English summary

The Committee addressed an attorney retained by an insurer to defend its insured who was asked by the insurer to send detailed billing records, describing the legal services provided, to an independent auditor the insurer had hired to review defense-counsel bills. The opinion assumed the billing records contained the insured's confidences and secrets and work-product material, and that the auditor was hired solely to review bills, not to manage the litigation.

The opinion concluded that compliance with the insurer's request was ethically problematic and that the attorney may not provide confidences and secrets in billing records to an outside auditor without the insured's specific consent. It explained that Rule 1.6(a) requires preserving client confidences and secrets unless the client consents after consultation, with an exception for disclosures impliedly authorized to carry out the representation. In the insurer-insured setting that exception ordinarily covers disclosures to the insurer, because the insurance contract typically lets the insurer control the defense, but it does not extend to a third party such as a billing auditor absent the insured's express or implied consent.

The opinion noted that disclosing privileged or work-product material to a third party selected by the insurer was problematic because it might waive the privilege or protection, that the waiver question was unsettled, and that the Committee expressed no opinion on it, leaving it to the courts. From the ethical standpoint, however, the duty was clear: because Rule 1.6(a) directs a lawyer to resolve any uncertainty about whether information can be revealed against revealing it, the attorney had to act cautiously and could not disclose without the insured's express consent. The opinion added that informed consent requires giving the insured the information needed to choose, which the attorney might satisfy by explaining the purpose of the auditor's review, how providing or withholding the information could affect the representation, and how the privilege or work-product protection might be waived.

Currency note

This opinion was issued in 1999, before Alaska's adoption of the 2009 revisions to the Alaska Rules of Professional Conduct. Subsequent rule amendments or later opinions may have changed the analysis. Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific rule, deadline, or requirement mentioned here.

Common questions

Q: Could defense counsel send the insured's bills to the insurer's outside auditor?

A: The opinion concluded counsel may not provide confidences and secrets in billing records to an outside auditor without the insured's specific consent.

Q: Doesn't the insurer's right to control the defense cover this?

A: Per the opinion, the implied-authorization exception in Rule 1.6(a) ordinarily covers disclosures to the insurer because the insurance contract lets it control the defense, but it does not extend to a third-party auditor without the insured's express or implied consent.

Q: Did the opinion decide whether sending bills to the auditor waives the privilege?

A: No. The opinion noted the waiver question was unsettled and left it to the courts, but concluded that because Rule 1.6(a) requires resolving uncertainty against disclosure, the attorney had to obtain the insured's consent.

Q: What does informed consent require here?

A: The opinion said the attorney may explain the purpose of providing the information to the auditor, how providing or withholding it could affect the representation, and how the privilege or work-product protection might be waived.

Background and rules framework

The opinion interpreted Alaska Rule of Professional Conduct 1.6(a) (confidentiality of information, including the directive to resolve uncertainty against disclosure; Model Rule 1.6) in the insurance-defense context. It referenced Ethics Opinion 89-3 and CHI of Alaska v. Employers Reinsurance, 844 P.2d 1113 (Alaska 1993), on the insurer's typical control of the defense, and Alaska Evidence Rule 503(a)(5) on the privilege.

Citations and references

Rules of Professional Conduct:

• Alaska RPC 1.6(a) (confidentiality; uncertainty resolved against disclosure)

Cases:

• CHI of Alaska v. Employers Reinsurance, 844 P.2d 1113 (Alaska 1993)
• United States v. Massachusetts Institute of Technology, 129 F.3d 681 (1st Cir. 1997)

Other opinions cited:

• Alaska Ethics Opinion 89-3

See also

• ABA Formal Op. 01-421: Insurer Litigation Guidelines
• AL Ethics Op. 1998-02: Third-Party Auditing of Lawyer's Billings
• AK Bar Ethics Op. 99-3: Insurer In-House Counsel Representing Insureds

Source

• Landing page: https://alaskabar.org/ethics-discipline/ethics-opinions/adopted-ethics-opinions-chronological/
• Original PDF: https://alaskabar.org/wp-content/uploads/99-1.pdf

Original opinion text

Reproduced from the official source for research purposes. The linked source is authoritative.

ALASKA BAR ASSOCIATION
ETHICS OPINION NO. 99-1
Ethical Obligation of Attorney When Insurer Requests Attorney to Send Billings to Outside Auditor Without Informed Consent of Insured

The Ethics Committee has been asked to address the ethical issues implicated when an attorney, who has been retained by an insurer to defend its insured, is asked by the insurer to send detailed billing records describing the legal services provided on behalf of the insured to an independent auditor hired by the insurer to review defense counsel billings. For purposes of this opinion, the Committee assumes, first, that the attorney’s billing records contain confidences and secrets of the insured, as well as matters covered by the attorney work-product doctrine, and, second, that the auditor is hired by the insurer solely to review attorney bills and is not involved directly in litigation management. The Committee concludes that the attorney’s compliance with the insurer’s request to send billings to the auditor is ethically problematic and that the attorney may not provide confidences and secrets in billing records to an outside auditor without specific consent from the insured. Alaska Rule of Professional Conduct 1.6(a) requires an attorney to preserve the confidences and secrets of the client unless the client consents after consultation. The rule provides an exception for “disclosures that are impliedly authorized in order to carry out the representation.” In the context of an attorney retained by an insurer to represent an insured, the exception ordinarily covers disclosures by the attorney to the insurer, because the typical insurance contract between the insurer and the insured states explicitly that the insurer may control the defense. See generally Ethics Opinion 89-3; CHI of Alaska v. Employers Reinsurance, 844 P.2d 1113 (Alaska 1993). However, the exception does not apply to disclosures to any third party, such as a billing auditor, when there is neither express nor implied consent from the insured for the disclosure. Disclosure of attorney-client privileged or work-product-protected materials to a third party, even one selected by the insurer, is problematic, because such disclosure may result in waiver of the privilege or protection. Whether disclosure of billing records to an auditor at the request of the insurer

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will waive the attorney-client privilege or work-product protection is uncertain.1 The Ethics Committee does not express an opinion on the waiver question; this issue must be resolved by the courts. From an ethical perspective, the attorney’s duty is clear. When attorneys act in areas where privilege questions are unresolved, they must act cautiously and choose the option least likely to result in an unintended waiver of the attorney-client privilege. ARPC 1.6(a) states explicitly that “[i]n determining whether information relating to representation of a client is protected from disclosure under this rule, the lawyer shall resolve any uncertainty about whether such information can be revealed against revealing the information.” Because it is not certain under current law whether an attorney’s disclosure of billing records to an outside auditor at the request of the insurer would waive the attorney-client privilege of the insured, the attorney may not provide confidences or secrets in billing records to an auditor without the express consent of the insured. Informed consent requires the attorney to provide whatever information the client needs in order to make an informed choice among alternatives. With respect to whether the insured should agree to release confidences and secrets in billing records to an auditor, the attorney may wish to explain to the insured the purpose of providing the information to the auditor, how providing or not providing the information could affect the attorney’s representation of the insured, and how the attorney-client privilege and attorney work-product doctrine might be waived by the disclosure.2

Approved by the Alaska Bar Association Ethics Committee on January 7, 1999. 1

While not directly on point, United States v. Massachusetts Institute of Technology, 129 F.3d 681 (1st Cir. 1997), is read by some commentators to suggest that disclosure to a third-party engaged as a billing auditor will waive the attorney-client privilege. Other commentators contend that disclosures to an auditor selected by an insurer fit within the protection of evidence rules comparable to Alaska Evidence Rule 503(a)(5) and therefore the privilege is not lost. 2

The Committee does not mean to imply that full discussion of all these topics is always required or that discussion of these issues is all that is ever required to obtain informed consent. The scope of information essential to informed consent depends on the particular circumstances.

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Adopted by the Board of Governors on January 15, 1999.

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