Can an insurance defense lawyer agree in advance to follow an insurer's litigation billing and management guidelines without regard to how they affect the insured?

Plain-English summary

An insurer that retains a lawyer to defend its insureds requires the lawyer to agree to comply with its litigation billing and management guidelines. The guidelines may, among other things, require insurer approval before the lawyer takes depositions, does legal research, prepares substantive motions, or hires experts; require certain tasks to be delegated to paralegals; and require status reports or litigation plans. The opinion asks whether the lawyer may agree to comply with the guidelines without regard to their effect on the lawyer's clients, and answers no.

The opinion concludes the lawyer may sign and return the insurer's acknowledgment letter to confirm acceptance of the assignment, but must advise the insurer that the lawyer cannot agree to comply with guidelines that might compromise the lawyer's ethical obligations. The lawyer may comply with the guidelines only after reviewing and evaluating them as applied to each case and reasonably concluding that compliance will not materially compromise the lawyer's independent professional judgment or ability to provide competent representation. An advance, blanket agreement would potentially surrender the lawyer's professional judgment, so it is not permitted.

The opinion applies Oregon RPC 1.8(f), which lets a lawyer accept compensation for representing a client from a third party only with the client's informed consent, with no interference with the lawyer's independent judgment or the client-lawyer relationship, and with protection of client information. It also applies Oregon RPC 1.1 (competence) and Oregon RPC 5.5(a), holding the lawyer may comply with a guideline directing that tasks be delegated to a paralegal only where, in the lawyer's independent judgment, the task is appropriate for a paralegal and the paralegal is adequately supervised. Reporting requirements such as status reports and detailed billing do not necessarily violate the rules if disclosure advances the interests of both insured and insurer and does not compromise the lawyer's independent judgment. The opinion notes that in Oregon a lawyer retained by an insurer to represent both insurer and insured must treat the insured as the primary client whose protection is the lawyer's dominant concern.

In practice

This opinion (revised 2016) interprets the current Oregon Rules of Professional Conduct, but it is more than five years old, so readers should verify the current rule text before relying on specifics. The opinion holds that compliance with insurer litigation guidelines is permissible only when the lawyer determines, case by case and step by step, that compliance will not restrict tasks the lawyer's professional judgment finds necessary to protect the insured. Per the opinion, if the lawyer cannot ethically comply with a particular guideline, the lawyer must obtain a modification from the insurer, or decline or withdraw from the representation. The analysis turns on preserving the lawyer's independent judgment and competent representation of the insured as the primary client.

Common questions

Q: Can an insurance defense lawyer sign a blanket agreement to follow the insurer's litigation guidelines?

A: No. The opinion concludes the lawyer cannot commit in advance to comply with the guidelines without reviewing their effect on each case, because an advance agreement would potentially surrender the lawyer's independent professional judgment.

Q: Can the lawyer sign the insurer's acknowledgment letter at all?

A: Yes. The opinion states the lawyer may sign and return the acknowledgment to confirm accepting the assignment, but must advise the insurer that the lawyer cannot agree to comply with guidelines that might compromise the lawyer's ethical obligations.

Q: Can the lawyer follow a guideline requiring tasks to be delegated to a paralegal?

A: Only with independent judgment and supervision. Under Oregon RPC 5.5(a), the opinion concludes the lawyer may delegate a task to a paralegal only if the lawyer independently judges it appropriate for the paralegal in that case and the paralegal is adequately supervised.

Q: What if a guideline conflicts with the lawyer's duty to the insured?

A: The opinion concludes the lawyer must obtain a modification of the guideline from the insurer, or decline or withdraw from the representation.

Background and rules framework

The opinion interprets Oregon RPC 1.8(f) (compensation from a third party), Oregon RPC 1.1 (competence), and Oregon RPC 5.5(a) (assisting unauthorized practice), corresponding to Model Rules 1.8, 1.1, and 5.5. It applies the Oregon rule that a lawyer retained by an insurer to represent both insurer and insured must treat the insured as the primary client whose protection is the lawyer's dominant concern.

Citations and references

Rules of Professional Conduct:

• Oregon RPC 1.8(f) / Model Rule 1.8 (accepting compensation from one other than the client)
• Oregon RPC 1.1 / Model Rule 1.1 (competent representation)
• Oregon RPC 5.5(a) / Model Rule 5.5 (assisting nonlawyer unauthorized practice)

Cases:

• In re Weidner, 310 Or 757, 801 P2d 828 (1990), test for an attorney-client relationship
• Evraz Inc., N.A. v. Continental Ins. Co., 2013 WL 6174839 (D Or 2013), no tripartite relationship on its facts

Other opinions cited:

• OSB Formal Ethics Op. No. 2005-121 (rev 2016); OSB Formal Ethics Op. No. 2005-77 (rev 2016); OSB Formal Ethics Op. No. 2005-30 (rev 2016): insured as primary client
• OSB Formal Ethics Op. No. 2005-157 (rev 2016): insurer reporting and audit information

See also

• ABA Formal Op. 01-421: Lawyer Under Insurance Company Guidelines
• OSB Ethics Op. 2005-121: Insurance Defense Conflicts
• OSB Ethics Op. 2005-157: Bills to an Insurer's Third-Party Audit Service
• OSB Ethics Op. 2005-77: Defending the Insured After Coverage Work

Source

• Landing page: https://www.osbar.org/ethics/toc.html
• Original PDF: https://www.osbar.org/_docs/ethics/2005-166.pdf