Who owns the insurance defense file, the insured or the insurer, and how long must a lawyer keep it?

Plain-English summary

After an insurer-funded defense settled, the policyholder and the insurer both claimed the case file, and the lawyer asked who owns it, who gets the original, who pays for copies, and whether the lawyer may agree to keep files for less than SCR 165's seven-year period. Drawing on its earlier Formal Opinions 9 and 26 and Section 134 of the Restatement (Third) of the Law Governing Lawyers, the Committee began from the premise that the policyholder is the client and the insurer is a third-party payer with significant contractual rights.

The Committee concluded the policyholder, as client, is entitled to the original file on request at the conclusion of the matter; the insurer also has a contractual right to a copy, but counsel must first redact privileged or ethically protected material that could be adverse to the policyholder in any actual or reasonably likely coverage dispute (citing SCR 156, 157, and 159). It recommended the lawyer keep a complete copy for the lawyer's records. Copying costs generally fall on the insurer, both for its own copy and for providing file materials to the policyholder, though insurer, policyholder, and counsel may make fair, clearly stated alternative arrangements (a provision shifting costs to an unsophisticated policyholder, or imposing substantial costs, may be unenforceable or unconscionable).

On retention, SCR 165(1) presumptively requires keeping client-property records for seven years. The Committee reasoned that file retention is a default duty a lawyer and client may shorten by knowing, written agreement so long as the period is reasonable, but that an agreement for less than four years (Nevada's malpractice limitations period) is presumptively unreasonable. It cautioned twice that the State Bar Counsel's position is that SCR 165's seven-year period is a duty owed to the state and the Court that cannot be contracted away, so a shorter agreement may bind the client yet still expose the lawyer to discipline. The Committee added that counsel must retain non-replicable items for the retention period and may discard replicable materials (noting in the file what was removed), and that the opinion does not reach financial records governed by SCR 78.5.

In practice

The opinion holds that, under the Nevada rules as they stood at the time, the insured policyholder is the client and is entitled to the original file on request, the insurer is entitled only to a copy redacted of privileged and client-adverse material, and copying costs ordinarily fall on the insurer. On retention, it treats a lawyer-client agreement to keep files for less than four years as presumptively unreasonable and warns that, whatever the client agrees to, Bar Counsel reads SCR 165 to require seven-year retention as a duty to the state. The specific rule numbers and the seven-year figure should be checked against the current rules.

Common questions

Q: Does the insured or the insurer own the defense file?

A: The opinion concluded the policyholder, as the client, has the greatest claim and is entitled to the original file on request; the insurer has a contractual right only to a copy.

Q: What must the lawyer redact before giving the insurer a copy?

A: Per the opinion, counsel must remove privileged or ethically protected material that could be adverse to the policyholder in any actual or reasonably likely coverage dispute, under SCR 156, 157, and 159.

Q: Can a lawyer and client agree to keep the file for fewer than seven years?

A: The opinion said they may agree to a shorter, reasonable period, but not less than the four-year malpractice limitations period; it warned that Bar Counsel treats SCR 165's seven years as a duty to the state that a client agreement cannot waive.

Q: Who pays for copying the file?

A: Generally the insurer, both for its own copy and for the policyholder's, though the parties may make fair, clearly stated alternative arrangements.

Background and rules framework

The opinion interprets former SCR 156 (confidentiality, now Rule 1.6), SCR 157 (conflicts, now Rule 1.7), SCR 159 (duties to former clients, now Rule 1.9), and SCR 165 (safekeeping of property and file retention, now Rule 1.15), alongside the Restatement (Third) of the Law Governing Lawyers, in the insurer-insured-counsel relationship.

Citations and references

Rules of Professional Conduct:

• Model Rule 1.6 / former Nev. SCR 156 (confidentiality of information)
• Model Rule 1.7 / former Nev. SCR 157 (conflicts of interest)
• Model Rule 1.15 / former Nev. SCR 165 (safekeeping of property; file retention)
• Model Rule 1.16 / former Nev. SCR 165 (return of the file on termination)

Cases:

• Figliuzzi v. District Court, 111 Nev. 338, 890 P.2d 798 (1995) (attorney's retaining lien)
• Comet Casualty Co. v. Schneider, 98 Ill. App. 3d 786, 424 N.E.2d 911 (1981) (return of files to insurer)
• 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)

Other opinions cited:

• State Bar of Nevada Formal Opinions 9 and 26 (policyholder is the client; limits on disclosing client-adverse information to the insurer)

See also

• NV Ethics Op. 26: insurer demanding coverage information from defense counsel
• NV Ethics Op. 18: a discharged lawyer's quantum meruit recovery and the client file
• NV Ethics Op. 9: insurance defense counsel and the insured's disclosure of fraud

Source

• Landing page: https://nvbar.org/for-lawyers/ethics-discipline/ethics-opinions/
• Original PDF: https://nvbar.org/wp-content/uploads/opinion_28.pdf