OHBPC June 1, 2000

Can an insurance defense lawyer follow the insurer's litigation management guidelines when those guidelines control legal research, staffing, discovery, or motions?

Short answer: The opinion concluded that it is improper under DR 5-107(B) for an insurance defense attorney to abide by an insurer's litigation management guidelines when the guidelines directly interfere with the attorney's professional judgment, such as requiring prior approval for legal research, dictating task assignments, or requiring approval before discovery, depositions, experts, or motions. Decided under the former Ohio Code of Professional Responsibility.

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This page answers the general question as of 2000. Ezel answers yours: whether it's allowed on your facts, under the current Ohio Rules of Professional Conduct, with citations.

Disclaimer: Advisory only. Not binding precedent.

About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official ethics opinion. The original opinion (linked on this page as a PDF) is the authoritative source for any reliance.

View original ethics opinion (PDF)

Currency note

This opinion was issued in 2000, before Ohio's adoption of the Ohio Rules of Professional Conduct (effective February 1, 2007). The Board flagged it as a "CPR Opinion" because it interprets the former Ohio Code of Professional Responsibility, since superseded. The DR 5-107(B) provision discussed here is now addressed by Ohio Prof. Cond. R. 5.4(c) and 1.8(f) (third-party direction of and payment for representation). 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 Treat this page as historical context, not current guidance.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 or requirement mentioned here.

Plain-English summary

The Board addressed whether an insurance defense attorney may follow an insurer's litigation management guidelines in defending an insured. It began from DR 5-107(B), under which a lawyer who is paid by a third party to render legal services for another must not permit the person paying to direct or regulate the lawyer's professional judgment. The Board's general conclusion was that attorneys must not yield professional control of their legal work to an insurer, and that guidelines directly interfering with professional judgment are improper.

The opinion worked through specific categories of guideline. Guidelines that restrict or require prior approval before performing computerized or other legal research interfere with professional judgment, because legal research improves competence and quality. Guidelines that dictate how work is allocated among the defense team, designating which tasks go to a paralegal, associate, or senior attorney, interfere because the attorney is professionally responsible for the legal services and must be able to decide who performs a task. Guidelines that require approval before conducting discovery, taking a deposition, or consulting an expert interfere, because those are professional decisions competent attorneys make routinely.

The Board likewise concluded that guidelines requiring the insurer's approval before filing a motion or other pleading interfere with professional judgment, describing motion-by-motion evaluation by the insurer as inappropriate. The Board noted that an insurer dissatisfied with the overall legal services retains the option of retaining different counsel in the future, but it may not regulate the lawyer's judgment in the ongoing representation.

Common questions

Q: Could an Ohio insurance defense lawyer follow guidelines requiring approval before doing legal research?

A: No. The opinion concluded that guidelines restricting or requiring prior approval for legal research interfere with the attorney's professional judgment and are improper under DR 5-107(B).

Q: Could the insurer dictate which tasks go to a paralegal versus an attorney?

A: No. The opinion concluded that guidelines dictating allocation of work among the defense team interfere with professional judgment, because the attorney is professionally responsible for the legal services.

Q: Could the insurer require approval before the lawyer files a motion or takes a deposition?

A: No. The opinion concluded that requiring approval before discovery, depositions, experts, or motions interferes with professional judgment; the Board described motion-by-motion insurer review as inappropriate.

Background and rules framework

The opinion interprets former Ohio Code of Professional Responsibility DR 5-107(B), under which a lawyer paid by a third party must not allow that payer to direct or regulate the lawyer's professional judgment in rendering legal services. That subject matter is now addressed by Ohio Prof. Cond. R. 5.4(c) and 1.8(f) (Model Rules 5.4 and 1.8), with the lawyer's duty to exercise independent professional judgment reflected in Ohio Prof. Cond. R. 2.1 (Model Rule 2.1).

Citations and references

Rules of Professional Conduct:

Former Ohio Code of Professional Responsibility DR 5-107(B)

Source

Landing page: https://ohioadvop.org/advisory-opinion-index/
Original PDF: https://www.ohioadvop.org/wp-content/uploads/2017/04/Op-00-003.pdf

Original opinion text

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

The Supreme Court of Ohio
BOARD OF COMMISSIONERS ON GRIEVANCES AND DISCIPLINE
41 SOUTH HIGH STREET-SUITE 3370, COLUMBUS, OH 43215-6105
(614) 644-5800 FAX: (614) 644-5804

                                         OFFICE OF SECRETARY


                                       OPINION 2000-3
                                      Issued June 1, 2000

[CPR Opinion-provides advice under the Ohio Code of Professional Responsibility which is superseded
by the Ohio Rules of Professional Conduct, eff. 2/1/2007.]

SYLLABUS: It is improper under DR 5-107(B) for an insurance defense attorney to
abide by an insurance company’s litigation management guidelines in the representation
of an insured when the guidelines directly interfere with the professional judgment of the
attorney. Attorneys must not yield professional control of their legal work to an insurer.

Guidelines that restrict or require prior approval before performing computerized or other
legal research are an interference with the professional judgment of an attorney. Legal
research improves the competence of an attorney and increases the quality of legal
services. Attorneys must be able to research legal issues when they deem necessary
without interference by non-attorneys.

Guidelines that dictate how work is to be allocated among defense team members by
designating what tasks are to be performed by a paralegal, associate, or senior attorney
are an interference with an attorney’s professional judgment. Under the facts and
circumstances of a particular case, an attorney may deem it necessary or more expedient
to perform a research task or other task, rather than designate the task to a paralegal. This
is not a decision for others to make. The attorney is professionally responsible for the
legal services. Attorneys must be able to exercise professional judgment and discretion.

Guidelines that require approval before conducting discovery, taking a deposition, or
consulting with an expert witness are an interference with an attorney’s professional
judgment. These are professional decisions that competent attorneys make on a daily
basis.

Guidelines that require an insurer’s approval before filing a motion or other pleading are
an interference with an attorney’s professional judgment. Motion by motion evaluation
by an insurer of an attorney’s legal work is an inappropriate interference with
professional judgment and is demeaning to the legal profession. If an insurer is
unsatisfied with the overall legal services performed, the insurer has the opportunity in
the future to retain different counsel.

Other guidelines may or may not interfere with an attorney’s professional judgment.
Insurance defense attorneys must exercise discretion in making such determinations.

Attorneys must provide reasonable and necessary services at reasonable fees. Attorneys
should communicate with the insurer regarding the status of the representation. The
Op. 2000-3 2

Board encourages attorneys to cooperate with insurers, but attorneys must not abdicate
control of their professional judgment to non-attorneys.

OPINION: This opinion addresses a question regarding insurance defense attorneys
abiding by an insurance company’s litigation management guidelines.

   Is it proper for an insurance defense attorney to abide by an insurance
   company’s litigation management guidelines in the representation of an
   insured?

The use of litigation management guidelines by insurance companies is raising ethical
concerns among members of the bar. See e.g., Connie B. Saylor, Restrictive Billing
Guidelines: The Ethical Problems, For the Defense, Jan. 1998, at 32-35. The primary
ethical concern is whether compliance with the guidelines interferes with the independent
professional judgment of insurance defense counsel and consequently with the quality of
legal services provided.

The use of litigation management guidelines is a cost control measure for insurers. The
guidelines are intended to improve cost efficiency. The guidelines direct defense counsel
on how the defense is to be conducted. “[G]uidelines typically mandate the form and
timing of reports to responsible claims personnel; condition, limit or restrict certain types
of discovery; require prior approval for travel; condition or restrict the time spent on legal
research or proscribe electronic or computerized research; and impose budgeting
requirements.” Douglas R. Richmond, Lost in the Eternal Triangle of Insurance Defense
Ethics, 9 Geo. J. Legal Ethics 475, 531 (1996).

Some examples of litigation management guidelines are as follows. Guidelines may
require that the insurer’s consent be obtained before filing a motion or taking a
deposition; that discovery be postponed until the end of discovery periods; that the
insurance company makes the judgment on whether discovery is necessary to the defense
or whether an expert witness is necessary; that certain tasks must be performed by
paralegals not attorneys; and that if the attorney takes discovery or files a motion without
the insurer’s consent, the attorney receives no compensation for the work performed.

It is a fact that the insurer enjoys some control over the insured’s defense through the
liability policy. A standard liability policy gives a company the right and duty to defend
a suit and the right to investigate and settle claims. See e.g., Insurance Services Office,
Inc., Sample Commercial General Liability Policy (1982, 1984), Sample Personal
Automobile Insurance Policy (1985), reprinted in Kenneth S. Abraham, Insurance Law
and Regulation: Cases and Materials, 439-48, 602-12 (1990).

Yet, it is axiomatic that no matter what the policy states, the insurance defense counsel
may not yield professional control of the legal work to an insurer. Under DR 3-101(A)
“[a] lawyer shall not aid a non-lawyer in the unauthorized practice of law.” Under DR 5-
107 (B) “[a] lawyer shall not permit a person who recommends, employs, or pays him to
render legal services for another to direct or regulate his professional judgment in
rendering such legal services.”
Op. 2000-3 3

The tension between insurer control of defense and settlement of claims and the exercise
of an attorney’s independent judgment on behalf of an insured exists in part because of
the unsettled nature of the insured, insurer, defense counsel relationship. The insured
purchases insurance from an insurance company. The insurance company promises to
defend claims against the insured and to indemnify the insured for judgments and
settlements. The insurance company hires an attorney to defend claims against insureds.
The insured agrees to cooperate.

The relationship has been described as a “tripartite relationship.” See e,g., Douglas R.
Richmond, Lost in the Eternal Triangle of Insurance Defense Ethics, 9 Geo. J. Legal
Ethics 475, 476-83 (1996), Ronald E. Mallen, Looking to the Millenium: Will the
Tripartite Relationship Survive? 66 Def. Counsel. J. 481 (1999). The precise nature of
the relationship among an insured, an insurer, and defense counsel is enigmatic.

There are different views as to whether the insured and insurer are both clients, or
whether the insured is a single client and the insurer is a third party payer, or whether the
relationship is characterized otherwise. See e.g., Atlanta International Insurance Co. v.
Bell, 475 N.W. 2d 294, 295 (Mich. 1991) (stating that “something less than a plenary
attorney-client relationship exists between a defense counsel and an insurer”); Charles
Silver, Does Insurance Defense Counsel Represent the Company or the Insured? 72 Tex.
L. Rev. 1583, 1590-1628 (1994) (supporting the view that the insurance company can be
defense counsel’s client jointly with the insured or even be the only client defense
counsel represents); (Charles Silver, Kent Syverud, The Professional Responsibilities of
Insurance Defense Lawyers, 45 Duke L.J. 255, 275 (1995) (endorsing the view that the
retainer agreement determines the number of clients defense counsel represents); Joanne
Pitullo, Three-Way Street: Discord Between Insurers and Insureds Puts Defense
Lawyers on Perilous Path, 81 A.B.A. J. 102 (1995) (purporting that the majority view is
that the insured is the sole client); Cincinnati Bar Ass’n, Op. 98-99-02 (undated) and
Vermont Bar Ass’n, Op. 98-7 (undated) (advising that the defense lawyer’s client is the
insured, not the insurance company); and ABA, Formal Op.96-403 (1996) (advising that
“[a] lawyer hired by an insurer to represent an insured may represent the insured alone or,
with appropriate disclosure and consultation, he may represent both the insurer and the
insured with respect to all or some aspects of the matter.” The Board found no reported
Ohio case law directly on point.

Within this patchwork of views regarding the nature of the relationship among the
insured, insurer and defense counsel, questions emerge regarding what is ethical conduct
for insurance defense attorneys. The unsettled nature of the relationship stimulates the
search for ethical guidance.

Whether an insurance defense attorney may abide by an insurer’s “litigation management
guidelines” without violating ethical duties of the legal profession has been the subject of
advisory opinions in this state and other states. The majority view is that certain carrier
imposed limitations give rise to ethical problems. See. e.g., Kentucky Bar Ass’n, Op. E-
331 (1988); Cincinnati Bar Ass’n, Op. 98-99-02 (undated); Indiana State Bar Ass’n,
Opinion 3 of 1998; Rhode Island Sup Ct, Ethics Advisory Panel, Op. 99-18 (1999);
Vermont Bar Ass’n, Op. 98-7 (undated); Sup Ct Tennessee, Bd of Professional
Responsibility, Ops. 88-F-113 (1988), 99-F-143 (1999), 99-F-143(a)(1999). Several of
Op. 2000-3 4

these opinions are reviewed herein to illustrate the scope of insurer imposed litigation
management guidelines on the practice of law and the responses thereto.

The Indiana State Bar Association in Opinion 3 of 1998 advised that “[t]he attorney may
enter into a contract to provide legal services that gives to the carrier the right to control
the defense of the insured, provided that such contract does not permit the carrier to direct
or regulate the lawyer’s professional judgment in rendering such legal services and does
not provide or encourage financial disincentives that likely would cause an erosion of the
quality of legal services provided.” The bar association pointed out that the professional
and independent judgment of defense counsel and the quality of legal services is
impinged by specific terms of some guidelines.

   Especially troublesome are those provisions of the subject agreement
   which tend to curtail reasonable discussion between members of the
   defense team on a day-to-day basis, and which seek to dictate the use of
   personnel within the lawyer’s own office. Another example of a provision
   resulting in a material disincentive provides that if the senior litigator
   performs a particular service, e.g., argument of motions and other court
   appearances, conduct of depositions, or review of medical records or legal
   research, which could have been performed “suitably” (in the carrier’s
   view) by an associate or paralegal, the service may be billed only at the
   hourly rate for the associate or paralegal. Similarly, the contract provides
   that once an associate attorney is assigned to a given matter, another
   associate may not be substituted without prior approval of the carrier.
   Such impairments of the responsible attorney’s exercise of professional
   judgment as to the assignment of the most effective member of the
   litigation team to a given task is ethically impermissible. Lastly, to
   require, or even to permit, counsel to rely upon legal research by an
   unsupervised paralegal invites legal malpractice—a breach a counsel’s
   duty to the insured—and is intolerable. Such provisions, even though
   intended merely to achieve cost efficiency, infringe upon the independent
   judgment of counsel, and tend to induce violations of our ethical rules.

Indiana State Bar Ass’n, Opinion 3 of 1998.

The Rhode Island Supreme Court, Ethics Advisory Panel in Op. 99-18 (1999) advised
that there were not ethical concerns with provisions that merely define the financial
relationship between the insurer and defense counsel or with provisions that coordinate
the roles of defense counsel and employees of the insurer assigned to the claim.

   However, certain other provisions, specifically those that require the
   insurer’s pre-approval for specified legal services, extend beyond the
   financial and working relationship between the insurer and defense
   counsel, and infringe upon the attorney-client relationship between the
   insured and the inquiring attorney. For example, the insurer’s prior
   approval is required before defense counsel engages in the following;
   conducting legal research in excess of three hours; filing counterclaims,
   cross-claims or third-party actions; visiting the accident scene; preparing

Op. 2000-3 5

   substantive dispositive motions or briefs; customizing interrogatories or
   document requests; and scheduling depositions. The insurer’s prior
   approval is also required before counsel incurs expenses related to any of
   the following: retaining expert witnesses; scheduling independent medical
   examinations or peer reviews; instituting surveillance; and conducting
   additional investigations. To the extent that the insurer reserves unto itself
   the right to withhold approval for reasonable and necessary legal services
   to be provided to an insured, these provisions of the guidelines
   impermissibly interfere with the independent professional judgment of the
   inquiring attorney.

Rhode Island Sup Ct, Ethics Advisory Panel, Op. 99-18 (1999).

The Cincinnati Bar Association in Opinion 98-99-02 considered litigation management
guidelines that require prior approval of “necessary legal research” subject to an agreed
budget; prior approval in the selection and retention of expert witnesses; and prior
approval for making any motion before the court.

   The bar association advised that “[t]he law firm may not ethically submit
   for prior approval legal research, selection and retention of experts, or
   motions. The auditors or insurance company employees reviewing the
   prior approval items are non-lawyers. Submission for prior approval
   violates DR 3-101(A)—Aiding Unauthorized Practice of Law. Even if the
   auditors or insurance company employees were lawyers, the practice
   violates DR 5-107(B)—Avoiding Influence by Others Than the Client.”

Cincinnati Bar Ass’n, Op. 98-99-02 (undated).

The disciplinary rules within the Ohio Code of Professional Responsibility do not
specifically address the tripartite relationship that exists between an insurer, an insured,
and defense counsel. Ethical Consideration 5-17 mentions insureds and insurers as an
example of situations in which a lawyer may be asked to represent individuals with
potentially different interests.
Op. 2000-3 6

          EC 5-17 TYPICAL POTENTIALLY DIFFERING INTERESTS

   Typically recurring situations involving potentially differing interests are
   those in which a lawyer is asked to represent co-defendants in a criminal
   case, co-plaintiffs in a personal injury case, an insured and his insurer, and
   beneficiaries of the estate of a decedent. Whether a lawyer can fairly and
   adequately protect the interests of multiple clients in these and similar
   situations depends upon an analysis of each case.                  In certain
   circumstances, there may exist little chance of the judgment of the lawyer
   being adversely affected by the slight possibility that the interests will
   become actually differing; in other circumstances, the chance of adverse
   effect upon his judgment is not unlikely.

This ethical consideration does not dictate a conclusion that an insured and insurer are to
be assumed to be dual clients. Asking a lawyer to represent two clients in a particular
case is not equated with a per se rule or assumption that a lawyer automatically in all
cases represents an insurer as well as an insured. This Board supports the view expressed
by the Cincinnati Bar Association that “[t]he insured, not the insurance company, is the
client” of defense counsel.

The disciplinary rules are unequivocal that it is the lawyer who directs and regulates his
or her own professional judgment, not the persons or entities paying for the rendering of
legal services to another. This is true regardless of whether an attorney represents one
client or dual clients. One client cannot direct an attorney’s professional judgment with
regard to another client. An attorney has a duty of loyalty to the insured and regardless of
whether the insurer is considered a dual client or a third party payer, the attorney cannot
allow the insurer to direct or regulate his or her professional judgment in legal services to
the insured.

       DR 5-107 AVOIDING INFLUENCE BY OTHERS THAN THE
                            CLIENT

   (B) A lawyer shall not permit a person who recommends, employs, or
   pays him to render legal services for another to direct or regulate his
   professional judgment in rendering such legal service.

This rule is reinforced by ethical considerations within the Ohio Code of Professional
Responsibility that emphasize the attorney’s duty of loyalty and duty of exercising
professional judgment solely for the benefit of the client.

                        EC 5-1 LOYALTY TO CLIENT

   The professional judgment of a lawyer should be exercised, within the
   bounds of the law, solely for the benefit of his client and free of
   compromising influences and loyalties. Neither his personal interests, the
   interests of other clients, nor the desires of third persons should be
   permitted to dilute his loyalty to his client.

Op. 2000-3 7

      EC 5-21 INFLUENCE OF THIRD PARTIES ON ATTORNEYS

   The obligation of a lawyer to exercise professional judgment solely on
   behalf of his client requires that he disregard the desires of others that
   might impair his free judgment. The desires of a third person will seldom
   adversely affect a lawyer unless that person is in a position to exert strong
   economic, political, or social pressures upon the lawyer. These influences
   are often subtle, and a lawyer must be alert to their existence. A lawyer
   subjected to outside pressures should make full disclosure of them to his
   client; and if he or his client believes that the effectiveness of his
   representation has been or will be impaired thereby, the lawyer should
   take proper steps to withdraw from representation of his client.

         EC 5-22 COMPENSATION FROM OTHER THAN CLIENT

   Economic, political, or social pressures by third persons are less likely to
   impinge upon the independent judgment of a lawyer in a matter in which
   he is compensated directly by his client and his professional work is
   exclusively with his client. On the other hand, if a lawyer is compensated
   from a source other than his client, he may feel a sense of responsibility to
   someone other than his client.

In conclusion, it is this Board’s view that it is improper under DR 5-107(B) for an
insurance defense attorney to abide by an insurance company’s litigation management
guidelines in the representation of an insured when the guidelines interfere with the
professional judgment of the attorney. Attorneys must not yield professional control of
their legal work to an insurer.

Other guidelines may or may not interfere with an attorney’s professional judgment.
Insurance defense attorneys must exercise discretion in making such determinations.

Attorneys must provide reasonable and necessary services at reasonable fees. Attorneys
should communicate with the insurer regarding the status of the representation. The
Board encourages attorneys to cooperate with insurers, but attorneys must not abdicate
control of their professional judgment to non-attorneys.

Advisory Opinions of the Board of Commissioners on Grievances and Discipline are
informal, nonbinding opinions in response to prospective or hypothetical questions
regarding the application of the Supreme Court Rules for the Government of the
Bar of Ohio, the Supreme Court Rules for the Government of the Judiciary, the
Code of Professional Responsibility, the Code of Judicial Conduct, and the
Attorney’s Oath of Office.

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