My insurance-defense client's insurer wants me to send detailed legal bills to an outside auditing company. Do I need the insured's consent before I do?
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This page answers the general question as of 1999. Ezel answers yours: whether it's allowed on your facts, under the current rules of professional conduct in your state, with citations.
Plain-English summary
An insurer hired the inquiring attorney and firm to represent its insured and required detailed, activity-by-activity billing statements, which the insurer had retained an outside company to audit. The attorney asked whether submitting billing statements that may contain confidential or privileged information to the insurer's outside auditor violates the Rules.
The panel concluded that although the insurer pays for the legal services and has some control over the defense, the lawyer's professional responsibility runs to the insured, and the lawyer's obligations are governed by the Rules of Professional Conduct rather than by the insurance contract or the contract between insurer and counsel. Applying Rule 1.6, the panel concluded that a lawyer's billing statement is information relating to the representation and is therefore protected, and that the two disclosure exceptions in Rule 1.6(b) did not apply. The panel further concluded that disclosure to the auditor was not impliedly authorized to carry out the representation, and that Rule 1.8(f)(3), which requires protecting confidential information from one paying for the representation, supported that reading.
The panel therefore concluded that counsel may submit an insured's billing statements to the auditor only after obtaining the insured's consent after consultation, and that this obligation exists notwithstanding the insurance contract, the contract between insurer and counsel, or any blanket authorization the insured gave the insurer without counsel. To obtain informed consent, the panel stated, counsel must evaluate and fairly identify for the client the reasonably foreseeable consequences of disclosure and non-disclosure, including possible effects on the attorney-client privilege. The panel noted that whether disclosure would waive the privilege is a substantive-law question outside its jurisdiction, and that where a privilege question is unresolved, counsel should act cautiously and choose the option least likely to result in unintended waiver.
Currency note
This opinion was issued in October 1999, after the Rhode Island Supreme Court adopted the Model Rules of Professional Conduct effective November 15, 1988, and it applies Rules 1.6 and 1.8(f) as originally adopted. The Rhode Island Supreme Court later revised the Rules of Professional Conduct in 2007 as part of the nationwide Ethics 2000 process. 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 mentioned here.
Common questions
Q: Is a lawyer's billing statement protected by the duty of confidentiality?
A: Yes. The opinion concluded that a lawyer's billing statement is information relating to the representation of a client and is therefore protected by Rule 1.6, which reaches all information relating to the representation, not just privileged matter.
Q: Can counsel send the bills to the insurer's auditor without asking the insured?
A: No. The opinion concluded that submitting billing statements containing confidential or privileged information to an outside auditor without the insured's consent after consultation is a breach of the lawyer's duty of confidentiality under Rule 1.6.
Q: Does a blanket authorization the insured gave the insurer satisfy the rule?
A: No. The opinion stated counsel must obtain the insured's consent notwithstanding the insurance contract, the contract between insurer and counsel, or a blanket authorization given to the insurer without the benefit of counsel, because the lawyer has a separate and independent ethical obligation to advise the client of the consequences of disclosure.
Q: What does "consent after consultation" require here?
A: The opinion stated counsel must communicate information reasonably sufficient for the client to appreciate the significance of the matter, including the reasonably foreseeable effects of disclosure and non-disclosure, such as possible effects on the attorney-client privilege.
Background and rules framework
The opinion applied Rhode Island Rules of Professional Conduct 1.6 (Model Rule 1.6) and 1.8(f) (Model Rule 1.8(f)) as originally adopted. Rule 1.6(a) prohibits revealing information relating to the representation unless the client consents after consultation or disclosure is impliedly authorized to carry out the representation. Rule 1.8(f)(3) requires that information relating to the representation be protected as required by Rule 1.6 when a third party pays for the representation. The panel drew on the Comment to Rule 1.6, the Terminology section's definition of "consultation," and out-of-state authority, including ABA Formal Opinion 96-403, in construing the tripartite insurer-insured-counsel relationship.
Citations and references
Rules of Professional Conduct:
- Model Rule 1.6 / RI RPC 1.6 (confidentiality of information)
- Model Rule 1.8(f) / RI RPC 1.8(f) (third-party compensation; protection of confidential information)
Cases:
- In re Ethics Advisory Panel, 627 A.2d 317 (R.I. 1992), scope of information protected by Rule 1.6
- United States v. Massachusetts Institute of Technology, 129 F.3d 681 (1st Cir. 1997), privileged information given to auditors became discoverable
Other opinions cited:
- ABA Standing Comm. on Professional Ethics, Formal Op. 96-403: lawyer's responsibility runs to the insured
- R.I. Ethics Advisory Panel Op. 98-10 (1998); Alabama Op. RO 98-02 (1998); D.C. Bar Op. 290 (1999); Florida Informal Op. 20591 (1997); Indiana Op. 4 (1998); Kentucky Op. E-404 (1998); North Carolina Op. 97-22 (1997); Utah Op. 98-03 (1998); Alaska Op. 991 (1999)
See also
- Alaska Bar Op. 99-1: Insurer billing records to an outside auditor
- Alabama Op. 1998-02: Third-party auditing of a lawyer's billings and confidentiality
- Colorado Op. 107: Third-party auditors in insurance defense
- Hawaii Op. 36: Disclosure of confidential information to insurer outside auditors
- RI EAP Op. 99-18: Insurer litigation management guidelines and counsel's independent judgment
Source
- Landing page: https://www.courts.ri.gov/attorney-resources/Pages/Ethics-Advisory-Panel-default.aspx
- Original PDF: https://www.courts.ri.gov/Opinions/EAP%2099-17.pdf
Original opinion text
Reproduced from the official source for research purposes. The linked source is authoritative.
Final
RHODE ISLAND SUPREME COURT
ETHICS ADVISORY PANEL
Opinion No. 99-17, Request No. 763(A)
Issued October 27, 1999
Facts:
An insurance company hires the inquiring attorney and his/her law firm to represent its insured.
The law firm's billing statements, as required by the insurer, are detailed and specific as to the services
provided to the insured. The insurer has retained an outside company to audit the law firm's billing
statements.
Issue Presented:
Does an attorney violate the Rules of Professional Conduct by submitting billing statements that
may contain confidential or privileged information to an insurance carrier's outside auditing company?
Opinion:
The submission of billing statements containing confidential or privileged information to an
outside auditor, without the express consent of the insured after consultation, is a breach of a lawyer's
ethical obligation to maintain confidentiality under Rule 1.6.
Reasoning:
The inquiring attorney on behalf of his/her law firm requests the Panel's opinion regarding a
lawyer's obligations to an insured when the insurance carrier has retained an independent company to
audit its legal bills. The insurer requires the law firm to submit detailed billing information directly to the
outside auditor. Pursuant to the insurer's billing requirements
for defense counsel, legal bills must separately list each activity performed, and activities must
be clearly described. According to one insurer's requirements which the inquiring attorney submitted to
the Panel, "each activity must be adequately described so that a person unfamiliar with the case may
determine what activity is being performed." Examples of the level of detail the insurer requires include
the subject matter of all written or oral communication, the identity of participants including witnesses
and clients, the specific issues researched, the identity of materials and documents reviewed, the
specific trial preparation performed, and a description of the specific issues central to pleadings,
motions, or memoranda prepared. There are others.
When an insured enters into a contract for insurance with an insurance company, the insurance
company agrees to provide legal representation for the insured. Generally, the insurance company
selects a lawyer for the insured. The insurer has a contract with the lawyer for the representation of
the insured. For its part, the insured agrees, among other things, to
Final Op. 99-17
Page 2
cooperate with the insurer in the defense of a claim and may also agree to the disclosure of information
relating to the legal representation. However, neither the contract for insurance, nor the contract
between the insurer and defense counsel, governs the lawyer's obligations to the insured. A lawyer's
obligations to his/her client, the insured, are governed by the Rules of Professional Conduct. See ABA
Standing Comm. on Professional Ethics, Formal Op. 96-403; R.I. Sup. Ct. Ethics Advisory Panel Op.
98-10 (1998). Thus, even though the insurance company is paying for the legal services, and enjoys
some degree of control over the insured's defense, the lawyer's professional responsibility runs to the
insured. See ABA Standing Comm. on Professional Ethics, Formal Op. 96-403.
Several Rhode Island Rules of Professional Conduct govern a lawyer's ethical obligations within
the context of the tripartite relationship between and among a lawyer, a client-insured, and an insurance
company that has agreed to provide legal representation to an insured. Rule 1.6 and Rule 1.8(f) are
applicable to the issue of submitting detailed billing statements to independent auditors. Rule 1.6 states:
Rule 1.6. Confidentiality of Information. -
(a) A lawyer shall not reveal information relating to representation
of a client unless the client consents after consultation, except for
disclosures that are impliedly authorized in order to carry out the
representation, and except as stated in paragraph (b).
(b) A lawyer may, but is not obligated to, reveal such information
to the extent the lawyer reasonably believes necessary:
(1) to prevent the client from
committing a criminal act that the
lawyer believes is likely to result in
imminent death or substantial bodily
harm; or
(2) to establish a claim or defense on
behalf of the lawyer in a controversy
between the lawyer and the client, to
establish a defense to a criminal charge
or civil claim against the lawyer based
upon conduct in which
Final Op. 99-17
Page 3
the client was involved, or to respond
to allegations in any
proceeding concerning the lawyer's
representation of the client.
Rule 1.8(f) provides:
Rule 1.8. Conflict of Interest: Prohibited Transactions. -
(f) A lawyer shall not accept compensation for
representing a client from one other than the client unless:
(1) the client consents after consultation;
(2) there is no interference with the lawyer's
independence of professional judgment or with the
client-lawyer relationship; and
(3) information relating to representation of a client is
protected as required by Rule 1.6.
When an insurer requests that defense counsel submit billing statements to an independent
auditor, the lawyer must determine as a threshold matter whether information contained in the statement
is protected by Rule 1.6. The principle of confidentiality raised by this inquiry is given effect in two
related bodies of law, the attorney-client privilege in the law of evidence, and the duty of confidentiality
established in the Rules of Professional Conduct. See Comment to Rules 1.6. The comment explains:
The attorney-client privilege applies in judicial and other
proceedings in which a lawyer may be called as a witness or
otherwise required to produce evidence concerning a client.
The rule of client-lawyer confidentiality applies in situations
other than those where evidence is sought from the lawyer
through compulsion of law. The confidentiality rule applies not
merely to matters communicated in confidence by the client but
also to all information relating to the representation, whatever its
source.
Thus, Rule 1.6 protects from disclosure a broader range of information. In re Ethics Advisory
Panel, 627 A.2d 317, 322 (R.I. 1992). Whether a lawyer's billing statement is
Final Op. 99-17
Page 4
privileged information is a substantive law question. Regardless, a lawyer's billing statement is
information relating to the representation of a client, and is therefore protected by Rule 1.6.
Rule 1.6(a) provides that a lawyer is prohibited from revealing information related to the
representation unless the client consents after consultation, or unless disclosure is impliedly authorized in
order to carry out the representation. In various circumstances, other Rules of Professional Conduct
may permit or require a lawyer to disclose information relating to the representation. See Comment to
Rule 1.6. Additionally a lawyer may be obligated or permitted by law to reveal information about a
client. Id. The two exceptions under Rule 1.6(b) which permit the disclosure of otherwise protected
information are not applicable to this inquiry.
The facts presented to the Panel do not suggest that disclosing the requested information to an
auditing company is necessary to the lawyer's carrying out the representation. The scope of "implied
authorization" as it applies to Rule 1.6 is illustrated by two examples provided in the Comment to the
Rule:
A lawyer is impliedly authorized to make disclosures about a
client when appropriately carrying out the representation,
except to the extent that the client's instructions or special
circumstances limit that authority. In litigation, for example, a
lawyer may disclose information by admitting a fact that cannot
properly be disputed, or in negotiation by
making a disclosure that facilitates a satisfactory conclusion.
Comment, Rule 1.6.
The Comment makes clear that implied authorization is limited to situations in which disclosure
is essential to the representation, and does not apply to the instant inquiry. See Indiana Bar Assoc.
Legal Ethics Comm. Op. 4 (1998). The express mandate of Rule 1.8(f)(3) requiring protection of
confidential information from disclosure to one who is paying for the legal services for a client supports
this interpretation.
Further, the Panel has found no other provisions of the Rules or requirements of other law
which expressly permit the disclosure of information protected under Rule 1.6 to an insurer's billing
auditors. Thus, the Panel concludes that the inquiring attorney and his/her law firm may submit to such
auditors an insured's billing statements only after obtaining the insured's consent after consultation.
Other ethics committees have concluded that an insured's consent after consultation is mandated
before a lawyer may disclose the insured's billing statements to outside auditors. See, e.g. Alabama
Bar Disciplinary Comm., Op. RO 98-02 (1998); D.C. Bar Legal Ethics Comm.
Final Op. 99-17
Page 5
Op. 290 (1999); Florida Bar Professional Ethics Comm. Informal Op. 20591 (1997); Indiana Bar
Assoc. Legal Ethics Comm. Op. 4 (1998); Kentucky Bar Assoc. Op. E-404 (1998); North Carolina
Ethics Advisory Comm. Op. 97-22 (1997); Utah Ethics Advisory Comm. Op. 98-03 (1998).
The Rules define "consultation" to mean "communication of information reasonably sufficient to
permit the client to appreciate the significance of the matter in question." Rules of
Professional Conduct, Terminology section. Under the circumstances of this inquiry, defense counsel
must therefore evaluate and inform the client of the reasonably foreseeable consequences of disclosure.
These consequences may include the effects of disclosure on the attorney-client privilege. See United
States v. Massachusetts Institute of Technology, 129 F.3d 681 (1st. Cir. 1997) (privileged information
given to auditors became discoverable). Similarly the effects of not consenting to the disclosure must be
evaluated with the client. In sum, in order to obtain the client's informed consent, the lawyer must
adequately and fairly identify the effects of disclosure and non-disclosure on the client's interests. See
D.C. Bar Legal Ethics Comm. Op. 290 (1999).
The Panel is further of the opinion that counsel must obtain the insured's consent before
disclosing the insured's billing statement notwithstanding anything to the contrary in either (1) the
contract between the insurer and defense counsel, (2) the contract of insurance (which may or may not
expressly provide for the insured's consent to the disclosure of confidential information,) or (3) a blanket
authorization for disclosure given to the insurer by the insured without the benefit of his/her counsel. A
lawyer has a separate and independent ethical obligation under the Rules to advise his/her client of the
consequences of disclosure and non-disclosure before obtaining the client's consent to disclose billing
statements to an outside auditor. See D.C. Bar Legal Ethics Comm. Op. 290 (1999); Utah Ethics
Advisory Comm. Op. 98-03 (1998). But see Mass. Bar Ethics Comm. (11-22-97) (as long as
auditor takes steps to protect confidential information, attorney's disclosure of protected information to
auditor is permissible without obtaining client's consent if client has already consented to disclosure to
insurer.)
Whether disclosure of an insured's billing statement to an outside auditor would result in a
waiver of the attorney-client privilege is a substantive law question to be decided by a court and which
is outside the jurisdiction of the Panel. Confronted with a privilege question that is unresolved, a
lawyer must act cautiously and, together with the client, choose the option least likely to result in
unintended waiver. See Alaska Bar Assoc. Ethics Comm. Op. 991 (1999).
The Panel concludes that a lawyer may submit billing statements containing confidential or
privileged information to an inquirer's billing auditor only with the client's consent after consultation.
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