Can an insurer demand information from defense counsel that it could use to deny the insured's coverage?

Plain-English summary

A law firm retained by an insurer to defend a subcontractor in construction-defect litigation was asked by the insurer to identify which claimed damages were "resultant damages" (damage to others' work, covered) as opposed to damage to the client's own work (not covered). Answering, even by omission, would tell the insurer which damages it could refuse to cover. The firm asked whether complying posed a conflict; the Committee concluded the firm may not provide the information without the client's consent.

The Committee's starting point was identifying the client: the firm was retained to defend the policyholder, so the policyholder is the firm's client, and there is no attorney-client relationship between the firm and the insurer on the defended claims (if coverage is the issue, the insurer should hire its own counsel). It read the retention as a third-party-beneficiary arrangement for the policyholder's benefit. Under Model Rule 5.4(c) (and SCR 188), a lawyer may not let a third-party payer direct or regulate the lawyer's professional judgment; the Committee found the insurer's request was effectively an attempt to do so, because the insurer's coverage position could expand or restrict the firm's defense of the client.

The Committee also grounded the result in SCR 156 (confidentiality): even if the insurer were treated as a second client, the firm could not give it information the firm believed the insurer would use against the policyholder, and SCR 169 (evaluation for use by a third person) would require the client's consent. It cited Ballard v. Eighth Judicial District Court (privilege covers an insured's statement taken at counsel's direction) and Ricketts v. Farmers Group (punitive damages where an insurer obtained privileged information to void coverage). The Committee added that the insurer may have a separate contractual "duty to cooperate" right to compel the policyholder to direct disclosure, and that the firm should pass the insurer's request to the client and, under the duty of competence (SCR 151) and the no-contact rule (SCR 182), explain the ramifications of disclosing or withholding.

Currency note

This opinion was originally issued in 2001 and its conclusion was amended in 2007; it predates Nevada's 2006 adoption of the current Nevada Rules of Professional Conduct (the renumbered Rules 1.0 et seq. that replaced the former Supreme Court Rules) and the related Ethics 2000-based revisions. The opinion carries a note that the Nevada Supreme Court later held in Nevada Yellow Cab Corp. v. Eighth Judicial District Court, 123 Nev. Adv. Op. No. 6 (2007), that an insurer-retained lawyer represents both the insured and the insurer (with the insured as the "primary" client), superseding contrary statements while leaving the opinion's conclusions otherwise intact. The relevant rules are now Rule 1.6 (confidentiality), Rule 5.4 (professional independence), and Rule 2.3 (evaluation for use by third persons). Treat this page as historical context, not current guidance. Verify against current rules and case law before relying on any specific rule mentioned here.

Common questions

Q: Who is the client when an insurer hires a lawyer to defend its policyholder?

A: The policyholder. The opinion concluded the policyholder is the firm's client and there is no attorney-client relationship between the firm and the insurer on the defended claims.

Q: Can the firm give the insurer information it would use to deny coverage?

A: No, not without the client's consent. The opinion concluded SCR 156 forbids giving the insurer information the firm believes the insurer would use to the policyholder's detriment.

Q: Can the insurer get the information another way?

A: Possibly. The opinion noted the insurer may have a contractual "duty to cooperate" right to compel the policyholder to direct disclosure, and the firm should relay the request to the client and explain the consequences.

Background and rules framework

The opinion interprets former SCR 151 (competence, now Rule 1.1), SCR 156 (confidentiality, now Rule 1.6), SCR 169 (evaluation for use by a third person, now Rule 2.3), and SCR 182 (communication with a represented person, now Rule 4.2), together with ABA Model Rule 5.4(c) (professional independence, now Rule 5.4), in the insurer-insured-counsel triangle.

Citations and references

Rules of Professional Conduct:

• Model Rule 1.6 / former Nev. SCR 156 (confidentiality of information)
• Model Rule 5.4(c) / former Nev. SCR 188 (professional independence of the lawyer)
• Model Rule 2.3 / former Nev. SCR 169 (evaluation for use by a third person)
• Model Rule 4.2 / former Nev. SCR 182 (communication with a represented person)

Statutes:

• Nev. Rev. Stat. 49.095 (attorney-client privilege)

Cases:

• Ballard v. Eighth Judicial District Court, 106 Nev. 83, 787 P.2d 406 (1990) (privilege covers an insured's statement taken at counsel's direction)
• Cronin v. Eighth Judicial District Court, 105 Nev. 635, 781 P.2d 1150 (1989) (counsel as the channel for information requests)
• Nevada Yellow Cab Corp. v. Eighth Judicial District Court, 123 Nev. Adv. Op. No. 6 (2007) (lawyer represents both insured and insurer; cited in the opinion's superseding note)

See also

• NV Ethics Op. 9: insurance defense counsel and the insured's disclosure of fraud
• NV Ethics Op. 28: ownership and retention of the insurance defense file

Source

• Landing page: https://nvbar.org/for-lawyers/ethics-discipline/ethics-opinions/
• Original PDF: https://nvbar.org/wp-content/uploads/opinion_26.pdf