Could insurance defense counsel follow an insurer’s audit, billing, and flat-fee requests without the insured’s informed consent?

Plain-English summary

An insurer asked defense counsel to send bills to an outside auditor, follow undisclosed billing guidelines, and accept flat fees without insured input.

The opinion said each request could be followed only with the insured client’s consent. Rules 4-1.8(f) and 4-1.4 required disclosure understandable enough for the insured to grasp the requests and their implications for representation. If consent was refused and the insurer did not waive its terms, counsel should withdraw.

Currency note

This opinion was issued in 1998, before Missouri’s 2007 revisions to the Rules of Professional Conduct. Later amendments or opinions may have changed the analysis. Treat this page as historical context and verify current rules before relying on it. The official Rule 4-1.9 and 4-1.10 reference notes identify July 1, 2007 amendments.

Common questions

Q: Did the insurer’s direction alone authorize submission to an auditor?

A: No. The opinion required the insured client’s consent.

Q: What if the client withheld consent and the insurer would not waive the terms?

A: The opinion said counsel should withdraw.

Background and rules framework

The answer cited Rules 4-1.8(f) and 4-1.4 for third-party payment and client communication.

Citations and references

Missouri Rules of Professional Conduct:

• Rule 4-1.8
• Rule 4-1.4

See also

• Missouri Informal Op. 990053: Insurer File Request

Source

• Landing page: https://mo-legal-ethics.org/informal-opinion/980188/

• Rule revision reference: Missouri Informal Opinion 20030007

Original opinion text

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

QUESTION: Attorney´s firm has been retained by insurance company and defends its insureds under liability policies. The insurance company requires Attorney´s firm to submit its bills directly to an outside auditing company, which is an independent contractor to the insurance company. The firm is required to submit the bills to the audit company with or without the consent of insured. Question 1. Would Attorney´s firm submitting its insurance company´s bill to the audit company violate the Rules of Professional Conduct? The insurance company has also provided the firm with “billing guidelines” to be followed in defending insureds. The insureds are not advised regarding the guidelines. Attorney´s firm believes that the guidelines are designed to benefit only the insurance company and not its insured. Question 2. Would the law firm violate the Rules of Professional Conduct by adhering to the billing guidelines in the preparation of a defense of this insured? Insurance company has requested Attorney´s firm agree to defend its insureds by a set or flat fee. Insured has no knowledge or input into the setting of the flat fee arrangement. Question 3. May Attorney´s firm enter into a contract with the liability insurer in which the firm agrees to do all or part of the defense work for a set fee either for all of the work or on a case-by-case basis?
ANSWER: In each of the circumstances Attorney has outlined, Attorney may only comply with the insurance company´s guidelines or requests, if the client consents. Under Rules 4–1.8(f) and 4–1.4 Attorney must inform the insured of the guidelines and requests in a manner such that the insured will understand the extent of the guidelines and requests and the implications of the guidelines and requests on the representation. If the insured does not consent or the insurance company does not waive its guidelines and requests in this case, Attorney should withdraw.