Can a lawyer who is a title insurance agent let the insurer audit the lawyer's trust accounts without client consent?

Plain-English summary

The inquiring attorney was counsel for a title insurance company. Under Florida statutes, a title insurer is liable if its licensed agent misappropriates trust funds and has liability for defalcations under closing protection letters. Many title agents in Florida are bar members, and the insurer wanted to audit the trust accounts of its attorney/agents. Some proposed audits would cover trust accounts used exclusively for transactions in which the attorney acts as the title or real estate settlement agent ("special trust accounts"), while others would cover accounts used for multiple purposes ("general trust accounts"). The question was whether the audits were permissible under the confidentiality rule, Rule 4-1.6.

The committee explained that Rule 4-1.6 ordinarily bars an attorney from voluntarily revealing any information relating to the representation of a client absent consent or an applicable exception, and that trust account records and client identity fall within that broad confidentiality. Because of that duty, the committee concluded an attorney/agent may permit an audit of a general trust account only if the affected clients have consented.

For a special trust account, the committee applied the exception in Rule 4-1.6(c)(1), which authorizes disclosure to serve the client's interest unless the client specifically requires it not be disclosed. Recognizing that audits by title underwriters are necessary to ensure the safety of funds in the account and thus facilitate a satisfactory conclusion for those whose funds are placed there, the committee concluded that, where a special trust account is used exclusively for the attorney's title or settlement-agent transactions, the attorney may permit the audits unless specifically directed otherwise by the client.

Currency note

This opinion was issued in 1994, before The Florida Bar's adoption of the 2006 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 Treat this page as historical context, not current guidance.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: Can a lawyer/title agent let the insurer audit a general trust account?

A: Under this opinion, only with the affected clients' consent, because trust account records are confidential under Rule 4-1.6.

Q: What about a trust account used only for the lawyer's settlement-agent transactions?

A: Per the opinion, the attorney may permit an audit of such a special account without prior consent, under the Rule 4-1.6(c)(1) exception, unless the client specifically directs otherwise.

Q: Why are trust account records confidential at all?

A: The committee had previously recognized that trust account records, and a client's identity, fall within the broad confidentiality established by Rule 4-1.6.

Background and rules framework

The opinion applied Rule 4-1.6 (confidentiality of information; Model Rule 1.6), including the subdivision (c)(1) exception for disclosures to serve the client's interest, in the context of Florida's title-insurance statutes governing agent defalcations.

Citations and references

Rules of Professional Conduct:

• Model Rule 1.6 / Fla. Rule 4-1.6 (confidentiality; subdivision (c)(1) exception)

Statutes:

• Fla. Stat. §§ 627.786, 627.792 (title insurer liability for agent defalcations)

Other opinions cited:

• Fla. Ethics Ops. 62-24, 72-3, 77-25

See also

• FL Bar Ethics Op. 12-4: Multiple Title Insurer Trust Account Audits
• FL Bar Ethics Op. 02-6: Disputed Real Estate Escrow Deposit
• FL Bar Ethics Op. 21-2: Venmo and PayPal Trust Funds

Source

• Landing page: https://www.floridabar.org/etopinions/etopinion-93-5/
• Original PDF: https://www-media.floridabar.org/uploads/2017/04/FL-Bar-Ethics-Op-93-5.pdf

Original opinion text

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

FLORIDA BAR ETHICS OPINION
OPINION 93-5
October 1, 1994
Advisory ethics opinions are not binding.
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.
RPC: 4-1.6
Opinions: 62-24, 72-3, 77-25
Statutes: F.S. §627.786, 627.792

The inquiring attorney is counsel for a title insurance company. Pursuant to F.S. §627.792, a title insurer is liable if its licensed agent misappropriates trust funds. Title insurers also have liability for defalcations under closing protection letters provided pursuant to F.S. §627.786. Many title insurance agents in Florida are members of The Florida Bar. The title insurance company wants to audit the trust accounts of its licensed attorney/agents. Some of the proposed audits would involve trust accounts devoted exclusively to transactions in which the attorney acts as the title or real estate settlement agent ("special trust accounts"), while others would involve trust accounts used for multiple purposes ("general trust accounts").

The issue presented is whether, or under what circumstances, the proposed audits would be ethically permissible under Rule 4-1.6, Rules Regulating The Florida Bar. This rule spells out an attorney's ethical duty of confidentiality:
(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 consents after disclosure to the client.
(b) When Lawyer Must Reveal Information. A lawyer shall reveal such information to the extent the lawyer believes necessary:
(1) to prevent a client from committing a crime; or
(2) to prevent a death or substantial bodily harm to another.
(c) When Lawyer May Reveal Information. A lawyer may reveal such information to the extent the lawyer believes necessary:
(1) to serve the client's interest unless it is information the client specifically requires not to be disclosed;
(2) to establish a claim or defense on behalf of the lawyer in a controversy between the lawyer and client;
(3) to establish a defense to a criminal charge or civil claim against the lawyer based upon conduct in which the client was involved;
(4) to respond to allegations in any proceeding concerning the lawyer's representation of the client; or
(5) to comply with the Rules of Professional Conduct.
(d) Exhaustion of Appellate Remedies. When required by a tribunal to reveal such information, a lawyer may first exhaust all appellate remedies.

Rule 4-1.6 ordinarily obligates an attorney to refrain from voluntarily revealing any "information relating to representation of a client" unless: (1) the attorney has the client's consent; or (2) the attorney fits one of the exceptions articulated in Rule 4-1.6. The ethical duty of confidentiality exists by virtue of Rule 4-1.6. In rendering this advisory opinion the committee is simply explaining and applying Rule 4-1.6 to the facts presented.

This committee previously has recognized that trust account records are confidential under Rule 4-1.6. See Florida Ethics Opinion 72-3. Likewise, the committee has opined that a client's identity may be confidential. See Florida Ethics Opinions 77-25 and 62-24. Thus, the information contained in trust account records falls within the broad ambit of confidentiality established by Rule 4-1.6(a).

Because of the duty of confidentiality, an attorney/agent ethically may permit a title insurer to audit the attorney's general trust account only if the affected clients have consented.

With regard to audits of a special trust account, however, one of the exceptions to the Rule 4-1.6 duty of confidentiality is relevant. 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.