Can a Florida lawyer let multiple title insurers audit a single real estate trust account without the clients' consent?

Plain-English summary

A member asked how to comply with both the Rules Regulating The Florida Bar and section 626.8473(8), Florida Statutes, effective July 1, 2012, which directs an attorney acting as a title or real estate settlement agent to deposit related funds in a separate trust account and permit it to be audited by "its title insurers," unless maintaining the funds there would violate Bar rules. The inquirer's firm has many lawyers serving as title agents for different insurers, representing different clients in unrelated transactions, with some transactions involving no title insurer; each insurer wants to audit the account used by its own agents.

On the first question, the opinion applies Rule 4-1.6(a), which bars voluntary disclosure of information relating to a representation without informed consent unless an exception applies, and the only relevant exception, Rule 4-1.6(c)(1), permitting disclosure the lawyer reasonably concludes is necessary to serve the client's interest unless the client instructed otherwise. The opinion reads Florida Ethics Opinion 93-5 as allowing a title insurer to audit a special trust account used exclusively for transactions in which the lawyer acts as that insurer's settlement agent, because the audit serves clients' interest in the safety of the funds. The committee distinguishes 93-5: there, the account held only one insurer's transactions, whereas here a shared account would expose each insurer to information about clients not involved with that insurer, triggering the lawyer's duties under Rules 4-1.4 and 4-1.6(a). So the answer to question one is no, unless the affected clients give informed consent or the lawyer reasonably concludes the audits are necessary to serve their interests and the clients have not prohibited disclosure.

On the second question, the apparent conflict between the statute (mandating one separate account audited by multiple insurers) and the rules, the opinion notes statutory interpretation is beyond its scope but offers general guidance. It restates that Rule 4-1.6(a) would require each client's informed consent before multiple insurers audit a single account, unless the serve-interest exception applies and clients have not prohibited disclosure, and it suggests three options to harmonize the obligations: a separate account for each insurer; one account with each client's informed consent to disclose to multiple insurers; or one account with each insurer's consent to audit only its own transactions. The opinion observes it may be reasonable for a lawyer to conclude the audits are necessary to serve affected clients' interests given the value of insurer audits in assuring the safety and proper disbursement of funds.

In practice

Under the Florida rules as they stood at the time of this 2013 opinion, a lawyer may not permit multiple title insurers to audit a single trust account holding unrelated client funds without informed consent or a reasonable serve-interest conclusion. The opinion makes the controlling factor whether the audit would expose one insurer to information about clients unrelated to that insurer, which implicates Rule 4-1.6(a) and the affirmative duties to inform and explain under Rule 4-1.4. It treats the Rule 4-1.6(c)(1) "serve the client's interest" exception as the path that can permit an audit without consent, and notes the lawyer may reasonably conclude the audits serve clients' interests in fund safety. The opinion sets out three account-structuring options to reconcile the statute and the rules, while stating that interpreting section 626.8473(8) is a legal question beyond an ethics opinion's scope.

Common questions

Q: Can one shared real estate trust account be audited by every title insurer the firm works with?

A: Not without addressing confidentiality. The opinion concludes a lawyer may not permit multiple insurers to audit a single account holding funds for clients unrelated to the auditing insurer unless the affected clients give informed consent or the lawyer reasonably concludes the audit is necessary to serve their interests and they have not prohibited disclosure.

Q: Is a single-insurer trust account different?

A: Yes. Consistent with Opinion 93-5, the opinion concludes a lawyer may permit one title insurer to audit a separate trust account used exclusively for transactions insured by that insurer without obtaining clients' informed consent, because the audit serves the clients' interest under Rule 4-1.6(c)(1).

Q: The statute seems to require the audit. Which controls, the statute or the rules?

A: The opinion notes statutory interpretation is beyond its scope, but explains the confidentiality rule would still require informed consent (absent the serve-interest exception) and offers three ways to structure accounts to satisfy both the rules and the statute.

Q: What account structures does the opinion suggest?

A: Per the opinion, a separate trust account for each title insurer; one account with each client's informed consent to disclose to multiple insurers; or one account with each insurer's consent to audit only the transactions it underwrites.

Background and rules framework

The opinion interprets Rule 4-1.6 (confidentiality of information, Model Rule 1.6) and Rule 4-1.4 (communication, Model Rule 1.4) of the Rules Regulating The Florida Bar, with reference to the IOTA trust-account requirements of Rule 5-1.1(g). It applies the Rule 4-1.6(c)(1) serve-interest exception and distinguishes Florida Ethics Opinion 93-5, in the context of section 626.8473(8), Florida Statutes.

Citations and references

Rules of Professional Conduct:

• Model Rule 1.6 / Fla. Rule 4-1.6 (confidentiality of information)
• Model Rule 1.4 / Fla. Rule 4-1.4 (communication)
• Fla. Rule 5-1.1(g) (IOTA trust accounts)

Statutes:

• Fla. Stat. § 626.8473(8) (separate trust account for title/settlement transactions; audit by title insurers)

Other opinions cited:

• Fla. Ethics Op. 93-5 (single-insurer special trust account may be audited without client consent)

See also

• Florida Bar Op. 21-2: Venmo, PayPal, and Trust Funds
• Florida Bar Op. 16-2: Client Financing of Legal Fees

Source

• Landing page: https://www.floridabar.org/etopinions/etopinion-12-4/
• Original PDF: https://www-media.floridabar.org/uploads/2017/04/FL-Bar-Ethics-Op-12-4.pdf

Original opinion text

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

FLORIDA BAR ETHICS OPINION
OPINION 12-4
August 21, 2013
Advisory ethics opinions are not binding.
A lawyer may not maintain a single trust account for all real estate transactions and allow
audits by multiple title insurers as required by Florida Statute §626.8473(8) unless the lawyer has
the consent of all affected clients or the lawyer reasonably concludes that it is necessary to serve
affected clients’ interests and the affected clients have not prohibited the disclosure of the
information.
RPC: 4-1.4, 4-1.6, 5-1.1(g)
Opinions: 93-5
Statutes: §626.8473 (8)
A member of The Florida Bar has requested an advisory ethics opinion. The legislature
adopted section 626.8473 (8), Florida Statutes, effective July 1, 2012, which states:
An attorney shall deposit and maintain all funds received in connection with
transactions in which the attorney is serving as a title or real estate settlement
agent into a separate trust account that is maintained exclusively for funds
received in connection with such transactions and permit the account to be audited
by its title insurers, unless maintaining funds in the separate account for a
particular client would violate applicable rules of The Florida Bar.
The inquirer asks for guidance regarding compliance with both the statute and the
applicable Rules Regulating The Florida Bar.1 The inquirer’s firm employs numerous attorneys
who handle real estate transactions and work with multiple title insurers. Some real estate
transactions involve no title insurance. The inquirer asks two questions which will be addressed
in turn:
Question 1: Is an attorney permitted to allow a title insurance company to
audit the firm’s special trust account used exclusively for real estate and title
transactions without the informed consent of the clients who have no
involvement with that particular title insurance company?
As explained below, a lawyer is not permitted to allow a title insurance company to audit
the special trust account used exclusively for real estate and title transactions if the special trust
account holds funds for client transactions that are unrelated to the title insurer requesting the
1 Trust accounts established pursuant to section 626.8473 (8), Florida Statutes (2012), must comply with the Interest
on Trust Accounts (IOTA) Program, Rule 5-1.1 (g), Rules Regulating The Florida Bar. The rule requires that
lawyers place short term or nominal funds in an IOTA trust account. Lawyers should place funds that are not short
term or nominal in a separate trust account with interest accruing to the benefit of the client or third party who owns
the funds.

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audit, unless the affected clients give informed consent or an exception to the confidentiality rule
applies.
Rule 4-1.6 (a), Rules Regulating The Florida Bar, prohibits a lawyer from voluntarily
disclosing any information regarding a representation without a client’s informed consent, unless
one of the exceptions to the rule applies, and states:
Rule 4-1.6 Confidentiality of Information
(a) Consent Required to Reveal Information. A lawyer shall not reveal
information relating to representation of a client except as stated in
subdivisions (b), (c), and (d), unless the client gives informed consent.
Emphasis added.
The Preamble of the Rules of Professional Conduct defines informed consent as follows:
“Informed consent” denotes the agreement by a person to a proposed
course of conduct after the lawyer has communicated adequate information and
explanation about the material risks of and reasonably available alternatives to the
proposed course of conduct.
The comment to Rule 4-1.6 further explains that confidentiality is fundamental to the
trust that is the hallmark of the attorney-client relationship and emphasizes the broad scope of the
rule:
The confidentiality rule applies not merely to matters communicated in
confidence by the client but also to all information relating to the representation,
whatever its source.
Emphasis added.
The confidentiality rule is limited by several exceptions that would permit a lawyer to
voluntarily disclose a client’s information without informed consent. The only exception
relevant to the present inquiry is Rule 4-1.6 (c) (1), which permits a lawyer to disclose
information without a client’s informed consent if the lawyer reasonably concludes that the
disclosure is necessary to serve the client’s interest, unless the client has specifically instructed
otherwise.
Florida Ethics Opinion 93-5 acknowledges that a lawyer must obtain a client’s consent2
to permit a title insurer to audit the lawyer’s general trust account, but advises that if the lawyer
uses a special trust account exclusively for transactions in which the lawyer acts as the title or
real estate settlement agent on behalf of that insurer, the exception under Rule 4-1.6 (c) (1) may
permit the audit without a client’s informed consent. The committee recognized that a client’s
interest is served if the title insurer’s audit ensures the safety of the funds held in the special trust
account and facilitates a satisfactory conclusion for clients whose funds are held in the account:
An attorney who is an agent for a title insurance company may not permit the title
insurer to audit the attorney’s general trust account without consent of the affected
clients. The attorney, however, need not obtain client consent before permitting
the insurer to audit a special trust account used exclusively for transactions in
which the attorney acts as the title or real estate settlement agent.
. . . .
. . . Subdivision (c)(1) authorizes an attorney to disclose confidential information
“to serve the client’s interest unless it is information the client specifically
requires not to be disclosed.” The committee recognizes that audits by title
insurance underwriters are necessary to ensure the safety of the funds deposited
in the special trust account and thus facilitate a satisfactory conclusion for those
whose funds are placed in the account. Consequently, if a special trust account is
used exclusively for transactions in which the attorney is acting as the title or real
estate settlement agent, the attorney ethically may permit the proposed audits
unless the attorney has been specifically directed otherwise by the client.
Florida Ethics Opinion 93-5 (emphasis added).
2Rule 4-1.6 (a), Rules Regulating The Florida Bar (1994), did not require informed consent, as is required by the
current applicable rule, and states: “A lawyer shall not reveal information relating to a representation of a client
except as stated in subdivisions (b), (c), and (d), unless the client consents after disclosure to the client.” Emphasis
added. The term “disclosure” was not defined in the 1994 Preamble.

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real estate settlement agent on behalf of that insurer, the exception under Rule 4-1.6 (c) (1) may
permit the audit without a client’s informed consent. The committee recognized that a client’s
interest is served if the title insurer’s audit ensures the safety of the funds held in the special trust
account and facilitates a satisfactory conclusion for clients whose funds are held in the account:
The facts of the present inquiry are distinguishable from those addressed in Florida Ethics
Opinion 93-5. The inquiry addressed in Opinion 93-5 was presented by a lawyer from the
general counsel of a title insurance company asking on behalf of the company wanting to audit,3
and therefore the opinion was written under the assumption that only transactions insured by that
one title insurer would be included in the special trust account discussed in the opinion.
The inquirer’s firm employs many lawyers who serve as title agents for different title
insurers and who represent many different clients in unrelated transactions. Some clients’
transactions involve no title insurer. The inquiry states that each title insurer wants to audit the
trust account used by its own title agents. Even if the firm maintains a separate trust account
exclusively for real estate and title transactions, the account will hold funds for different clients
who are represented by different lawyers who are title agents for different title insurers, and
some client funds will be held for transactions that involve no title insurer.
If the firm permits each title insurer to audit the separate trust account without clients’
informed consent, each insurer will obtain information relating to the firm’s representation of
clients who are not involved in any transaction with that particular title insurer. The inquirer’s
affirmative duties to inform and explain under Rules 4-1.4 and 4-1.6 (a) would be triggered
3 Florida Ethics Opinion 93-5 was outside the scope of ethics opinions customarily issued by the Professional Ethics
Committee.

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under such circumstances, unless the lawyer reasonably concludes that allowing all title insurers
to audit the trust account is reasonably necessary to serve each affected client’s interests or the
affected clients have specifically prohibited the lawyer from disclosing the information.
Based on the foregoing, the answer to the inquirer’s first question is no, an attorney is not
permitted to allow a title insurance company to audit the special trust account used exclusively
for real estate and title transactions if the special trust account holds funds for client transactions
unrelated to the title insurer requesting the audit, unless the attorney obtains the affected clients’
informed consent or the lawyer reasonably concludes that the audits are reasonably necessary to
serve the affected client’s interests and the affected clients have not prohibited the disclosure.
If, however, consistent with Florida Ethics Opinion 93-5, the special trust account is used
exclusively for real estate and title transactions insured by a single title insurer, the inquirer may
allow that one title insurer to audit the special trust account without a client’s informed consent.
Question 2: If an attorney is not ethically permitted to allow a title insurer to
audit the special trust account without the clients’ informed consent because
the special trust account involves unrelated transactions, but new section
626.8473 (8), Florida Statutes, requires that attorney to allow the audit, does
the attorney abide by the ethics rules or the statute?
The inquirer’s second question arises from concerns regarding the interpretation of
section 626.8473 (8), Florida Statutes, which became effective July 1, 2012, and states:
(8) An attorney shall deposit and maintain all funds received in connection with
transactions in which the attorney is serving as a title or real estate settlement
agent into a separate trust account that is maintained exclusively for funds
received in connection with such transactions and permit the account to be audited
by its title insurers, unless maintaining funds in the separate account for a
particular client would violate applicable rules of The Florida Bar.
Although questions of statutory interpretation are beyond the scope of an ethics opinion,
pursuant to Procedure 2 (a) (1)(D), Florida Bar Procedures for Ruling on Questions of Ethics
(2012), the committee offers the following general discussion to provide guidance to bar
members.
The statute appears to mandate that lawyers maintain a separate trust account devoted
exclusively to funds held in connection with transactions in which the lawyer serves as a title or
real estate settlement agent. The statute appears to further require that the lawyer permit the
separate trust account to be audited by multiple title insurers.
As discussed in the answer to the inquirer’s first question, Rule 4-1.6 (a), Rules
Regulating The Florida Bar would require that a lawyer obtain each client’s informed consent
before permitting multiple title insurers to audit a single trust account, even if that separate trust
account was devoted exclusively to holding funds for clients’ real estate and title transactions,
unless the lawyer reasonably concludes that the audits are necessary to serve the interests of the
affected clients and the affected clients have not specifically prohibited disclosure of the
information. Consistent with Florida Ethics Opinion 93-5, a lawyer would not be required to

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obtain clients’ informed consent to permit one title insurer to audit a separate trust account that is
devoted exclusively to funds for clients’ transactions that are insured by the one title insurer
requesting the audit, because the audit would serve the clients’ interests under Rule 4-1.6 (c) (1).
If the lawyer concludes that permitting the audits by multiple title insurers is not
necessary to serve affected clients’ interests or if affected clients have instructed the lawyer not
to disclose the information, the lawyer should consider maintaining: 1) a separate trust account
for each different title insurer used by that lawyer or law firm, or 2) one separate trust account
and obtain each client’s informed consent to disclose information regarding their transactions to
multiple title insurers for their audits, or 3) one separate trust account and obtain consent from
the various title insurers to audit only the information related to transactions that the title insurer
is underwriting. With respect to number 2 in the preceding sentence, the lawyer may obtain the
client’s informed consent in the sales contract or in a separate document executed by the client
prior to or at the closing.
In sum, the inquirer may not permit multiple title insurance companies to audit a single
trust account used exclusively for real estate and title transactions, unless the lawyer reasonably
concludes that permitting the audits would serve the affected clients’ interests and the affected
clients have not prohibited disclosure of the information. In recognition of the value of title
insurance underwriter audits in assuring the safety and proper disbursement of funds deposited
into a special trust account, it may be reasonable for an attorney to conclude that such an audit
would be reasonably necessary to serve the affected client’s interests. The inquirer may permit a
title insurer to audit a single trust account used exclusively for client transactions insured by the
title insurer requesting the audit. The answer to the inquirer’s second question offers three
alternatives that may harmonize the inquirer’s obligations under the applicable Rules Regulating
The Florida Bar and the statute if the lawyer concludes that permitting the audits is not necessary
to serve the affected clients’ interests or if affected clients’ have prohibited the lawyer from
disclosing the information.