Can an insurance defense lawyer send the insured's legal bills to an outside auditor hired by the insurance carrier without the insured's consent?

Plain-English summary

A lawyer retained to defend insured individuals was asked, under the carrier's practices, to submit defense bills directly to an independent auditor the insurer engaged to review them. The committee considered whether the lawyer could do so without the insured's consent.

The committee applied DR 4-101, which bars a lawyer from knowingly revealing a client's confidences or secrets except with the client's consent after full disclosure. It reaffirmed that when a lawyer defends a policyholder, the client is the policyholder, not the insurance company, even though the insurer pays the fees; the lawyer owes the insured undivided fidelity (N.Y. State 73 (1968); Feliberty v. Damon). The committee concluded the client's legal bills and supporting documentation are subject to the duty of confidentiality, because itemized bills can reveal the substance of the representation, including strategy, the work performed, and other secrets.

Because the records are protected, the committee held they may be disclosed to the carrier's auditor only with the client's informed consent. To let the client make a voluntary, informed decision, the lawyer must give advice that is competent and designed exclusively to promote the client's interests, not the insurer's or the lawyer's; and if consent is given, the lawyer must continue to act in accordance with the client's interests. The insurance contract itself does not supply that consent.

Currency note

This opinion was issued in 1999, under New York's former Code of Professional Responsibility, which New York replaced with the Rules of Professional Conduct in 2009. 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 Treat this page as historical context, not current guidance.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 defense lawyer send the insured's bills to the carrier's outside auditor?

A: The opinion concluded the lawyer may do so only with the insured's informed consent, because the billing records contain the client's confidences or secrets under DR 4-101.

Q: Who is the client when the insurer pays the bills?

A: The opinion reaffirmed the insured policyholder is the client, not the carrier, and the lawyer owes the insured undivided fidelity even though the carrier pays the fee.

Q: Does the insurance contract count as consent to disclose the bills?

A: No. The opinion held the lawyer must obtain the insured's specific informed consent, after advice given solely in the client's interest, before submitting the bills.

Background and rules framework

The opinion interpreted DR 4-101 (confidences and secrets) and DR 5-107 (third-party payment and independent judgment) of New York's former Code of Professional Responsibility. The Model Rule analogues are Rule 1.6 (confidentiality) and Rule 5.4 (professional independence; third-party payment). New York replaced the Code with the Rules of Professional Conduct in 2009; the DR numbers cited here are historical.

Citations and references

Rules of Professional Conduct:

• MR 1.6 (confidentiality of information)
• MR 5.4 (professional independence; third-party payment)
• NY DR 4-101; DR 5-107

Cases:

• Feliberty v. Damon, 72 N.Y.2d 112 (1988), independent counsel's paramount interest is the insured's

Other opinions cited:

• N.Y. State 73 (1968): the lawyer owes the insured undivided fidelity though the insurer pays the fee

See also

• NY State Bar Op. 721: Insurer-directed legal research and brief banks
• NY State Bar Op. 718: Disclosing extracted client data for a statistical study
• NY State Bar Op. 726: Insurance staff counsel holding out as a law firm

Source

• Landing page: https://nysba.org/opinion-716/