Can a lawyer reveal a client's identity to his own malpractice insurer to secure coverage for a potential claim by that client?

Plain-English summary

Attorney B had long represented Company X, which discovered it had failed to file certain informational returns, exposing it to penalties and exposing Attorney B to potential liability. Company X made no formal claim and retained no separate counsel. Attorney B's malpractice policy required notice of any act or omission that could give rise to a claim, with the fullest information obtainable, and required cooperation. Attorney B notified his insurer of the potential claim but withheld Company X's identity as confidential. The insurer retained Attorney C to help remedy the filings and defend Attorney B, and Attorney C asked Attorney B for more information about Company X under the policy.

The opinion explained that a client's identity is not normally confidential under Rule 4, while the fact that Company X failed to file returns normally would be confidential, but that here, because Attorney B had already revealed the failure to file without the name, disclosing Company X's identity would effectively reveal the secret for the first time, making the identity a confidence. As a confidence, it could not be revealed unless a Rule 4(c) exception applied; under Rule 4(c)(5), a lawyer may reveal confidences to the extent reasonably necessary to establish a defense between the lawyer and a client. Citing the comment to Rule 4, the opinion noted a lawyer need not wait until suit is filed to respond to a claim, but any disclosure should be closely tailored to the need to defend. It concluded that Attorney B may reveal information about Company X to Attorney C, who would represent B, but only what is absolutely required under the policy; because B is C's client to whom C owes primary responsibility, C may not reveal that information to the insurer without B's consent. The opinion stated there is no exception to the duty to preserve confidences merely to assure the lawyer's coverage, and that exactly what must be disclosed, and to whom, to comply with the policy is a question of law beyond the committee's authority.

Currency note

This opinion was issued in 1989, before the North Carolina State Bar's adoption of the 2003 revisions to the Rules of Professional Conduct. The confidentiality provisions it applies (Rule 4, Rule 4(c)(5)) have since been renumbered and revised (the corresponding Model Rule is 1.6). 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: Is a client's identity confidential?

A: Not normally, the opinion said, but here it had become a confidence because the lawyer had already disclosed the client's wrongdoing without the name, so naming the client would reveal the secret.

Q: Can the lawyer disclose the client's identity to secure malpractice coverage?

A: The opinion concluded that the lawyer may reveal only what is absolutely required, and only to the lawyer defending him under the self-defense exception; there is no confidentiality exception simply to assure coverage.

Q: Can the defense lawyer pass the client information to the insurer?

A: No. The opinion concluded that, because the insured lawyer is the defense lawyer's client, the defense lawyer may not reveal information received from him to the insurer without the insured lawyer's consent.

Background and rules framework

The opinion applied North Carolina Rule 4 (confidentiality) and its self-defense exception in Rule 4(c)(5), corresponding to Model Rule 1.6. The analysis hinges on how a prior partial disclosure converted the ordinarily non-confidential client identity into a protected confidence, and on confining any defensive disclosure to what is strictly necessary, owed first to the lawyer-client (the insured) rather than the insurer.

Citations and references

Rules of Professional Conduct:

• North Carolina Rule 4 (confidentiality of client information)
• North Carolina Rule 4(c)(5) (disclosure to establish a defense between lawyer and client)
• MR 1.6 (confidentiality of information)

See also

• NC Ethics Op. RPC 117: reporting a client's contagious disease
• NC Ethics Op. RPC 120: reporting child abuse

Source

• Landing page: https://www.ncbar.gov/for-lawyers/ethics-and-governing-rules/ethics-opinions/opinions/rpc-77/

Original opinion text

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

Inquiry:

Attorney B has represented Company X for many years in connection with various tax and legal matters. Company X later learned that for several years it has failed to file certain informational returns, which could subject it to significant criminal and civil penalties. Attorney B, as Company X's lawyer, may in turn be liable for any penalties that Company X incurs arising out of its failure to file. Company X does not make any formal claim or demand against Attorney B, however, and does not retain separate counsel to represent its interests against Attorney B.

Attorney B is insured by Insurance Company. The insurance policy with Attorney B provides, in relevant part:

V. Notice of Claim or Suit

As a condition precedent to coverage afforded by this policy, upon any Insured becoming aware of any act or omission which could reasonably be expected to be the basis of a claim or suit covered hereby, written notice shall be given to the Company or any of its authorized agents as soon as practicable, together with the fullest information obtainable. If claim is made or suit is brought against any Insured, such Insured shall immediately forward to the Company every demand, notice, summons or other process received by that Insured...

The Insured shall cooperate with the Company and at the Company's request make available all records and documents and submit to examination(s) under oath by a representative of the Company.

Attorney B notifies Insurance Company of Company X's potential claim, but fails to identify Company X specifically or provide information whereby Company X could be identified, on the grounds that such information would constitute disclosure of confidential information.

After receiving notification, Insurance Company retains Attorney C to assist Attorney B in remedying Company X's failure to file tax returns and to defend Attorney B against any claims by Company X. Attorney C asks Attorney B for more information about Company X, pursuant to the terms of the insurance policy.

• May Attorney B disclose the identity of Company X and other relevant background information about Company X, such as the number of its employees and nature of its business to Insurance Company without obtaining Company X's consent?

• May Attorney B disclose this information to Attorney C without obtaining Company X's consent?

• If the answer to (1) is no and the answer to (2) is yes, may Attorney C then reveal the information to Insurance Company?

Opinion:

The identity of a client is not normally considered confidential information protected by Rule 4, whereas the fact that Company X has failed to file income tax returns normally would constitute confidential information. In this case, however, because Attorney B has already revealed the failure to file returns, but not the name of the company, disclosure of Company X's identity would effectively disclose Company X's secret for the first time.

Because Company X's identity is a confidence under these circumstances, it may not be revealed, unless one of the exceptions to the confidentiality rule set out in Rule 4(c) is present. Under Rule 4(c)(5), a lawyer may reveal confidences to the extent the lawyer reasonably believes necessary to establish a defense between the lawyer and a client.

While Company X has not yet filed a claim against Attorney B, the comment to Rule 4 indicates that a lawyer need not wait until an action is commenced before responding to a claim or accusation. On the other hand, the comment also makes it clear that any disclosure should be closely tailored to the attorney's need to defend him or herself. It is the opinion of the Ethics Committee that Attorney B may reveal information about Company X to Attorney C who will represent B in the event of a claim by Company X, but that Attorney B should only reveal that which is absolutely required under the policy. B is Attorney C's client to whom he owes primary responsibility. Accordingly C may not reveal information received from B to the insurance company without B's consent.

There is no exception to the lawyer's obligation to preserve client confidences for the purpose of assuring Lawyer B's coverage under his professional liability policy.

The question of what exact information must be revealed and whether it should be revealed to Attorney C or to Insurance Company directly to comply with Insurance Company's policy is a question of law beyond the authority of the Ethics Committee.