Can defense counsel paid by an insurer send detailed billing and case information to the insurer or its outside bill-auditing company?

Plain-English summary

Opinion 290 (adopted April 1999) addressed a law firm that defends insureds and is paid by an insurer, where the insurer required the firm to submit detailed billing to an outside auditing agency. The auditor wanted descriptions specific enough for an outsider to know what was done, including participant identities, the content of communications, issues researched, trial preparation, and documents reviewed and work product generated. The firm asked about its duties to the insured client.

The committee analyzed Rules 1.6 and 1.8(e). Rule 1.8(e) lets a lawyer accept payment from someone other than the client only if the client consents, the lawyer's independence is not compromised, and client information is protected as Rule 1.6 requires; so the insurer's payment of fees does not relax the duty to protect confidences and secrets. The committee held that at least some of the detailed information the auditor sought was protected by Rule 1.6, and that none of the exceptions applied: the retention did not imply authorization to disclose (implied authorization is limited to disclosures essential to the representation), and the Comment [11] exception for routine outside services like bookkeeping did not cover substantive information given to an auditor the lawyer neither selects nor controls. Therefore the firm could release such information to the insurer only with the insured's consent after full disclosure.

On disclosure and consent, the committee stressed that the lawyer's duty is governed by the Rules, not the insurance contract, so the lawyer must review any contractual consent with the client to see whether it amounts to informed consent; the lawyer must explain the foreseeable consequences of both disclosure and non-disclosure (including possible privilege waiver and possible loss of coverage), and must be alert to the Rule 1.7(b)(4) conflict between the lawyer's own interests (avoiding a billing audit, or preserving the insurer relationship) and the client's. On the auditor specifically, the committee held disclosure to an independent auditor requires its own Rule 1.6 analysis; consent to disclose to the insurer cannot be assumed to include the auditor. It declined to follow the contrary Massachusetts approach. The committee added that insurers are not bound by the Rules, so before disclosing to the insurer the lawyer should instruct it not to release the protected information and flag the material, advising the client of any added risk.

Currency note

This opinion was issued in 1999, before the District of Columbia's adoption of the 2007 revisions to the 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 counsel send detailed bills to the insurer without the insured's consent?

A: The opinion concluded no, where the bills contained confidences or secrets. The lawyer could release such protected information to the insurer only after disclosing the consequences to the insured and obtaining consent.

Q: Did consent to disclose to the insurer cover the insurer's outside auditor?

A: The opinion concluded no. Disclosure to an independent auditor required a separate Rule 1.6 analysis and separate consent; consent to disclose to the insurer could not be assumed to include the auditor.

Q: Did the insurance contract's cooperation clause supply the needed consent?

A: The opinion held the lawyer's duty is governed by the Rules, not the contract, so the lawyer had to review any contractual consent with the client to determine whether it constituted informed consent under Rule 1.6.

Q: What conflict did the committee flag in seeking consent?

A: The opinion identified a Rule 1.7(b)(4) personal-interest conflict: the lawyer might have an interest in avoiding a billing audit or in preserving the insurer relationship, and so should neither exaggerate nor downplay the risks when seeking the client's consent.

Background and rules framework

The opinion interpreted D.C. Rule 1.6 (confidentiality; the consent, implied-authorization, and Comment [11] outside-services provisions) and Rule 1.8(e) (accepting compensation from one other than the client, with its consent, independence, and confidentiality conditions). It also referenced Rule 1.7(b)(4) (personal-interest conflict) and Rules 1.1 and 1.4(b) where disclosure risks waiving privilege, and surveyed numerous other jurisdictions' insurer-audit opinions.

Citations and references

Rules of Professional Conduct:

• D.C. RPC 1.6 / Model Rule 1.6 (confidentiality)
• D.C. RPC 1.8(e) / Model Rule 1.8(f) (compensation from a third party)
• D.C. RPC 1.7(b)(4) / Model Rule 1.7 (personal-interest conflict)

Cases:

• In re James, 452 A.2d 163 (D.C. 1982) (informing the client per the client's sophistication)

Other opinions cited:

• Virginia LEO 1723; Indiana Op. 4 of 1998; Maryland Op. 99-7; Massachusetts Op. (Nov. 22, 1997) (not followed)

See also

• DC Ethics Op. 383: Outside Counsel Guidelines
• ABA Formal Op. 01-421: Insurer Litigation Guidelines
• ABA Formal Op. 03-430: Insurance Staff Counsel

Source

• Landing page: https://www.dcbar.org/for-lawyers/legal-ethics/ethics-opinions-210-present/ethics-opinion-290