Can insurance defense counsel get around the consent rule for insurer audits by redacting confidences or routing bills through the insurer?

Plain-English summary

This opinion answered a request to clarify 99-F-143, which had required client consent before insurer auditors review an attorney's bills and case files and barred agreements giving the insurer power to direct the representation. It resolved three points.

First, on whether counsel could simply redact confidences and secrets before sending bills and files to auditors, the opinion concluded that client consent remains necessary. It explained that DR 4-101(a) protects not only privileged information but also any "secret," which can be almost anything the client wishes to keep confidential (the opinion cited 82-F-25, which treated even zip codes, birth dates, race, and referral sources as possible secrets), and that the attorney cannot unilaterally decide what the client wishes to keep secret.

Second, on whether counsel could avoid the rule by sending the bill to the insurer knowing the insurer would forward it to the auditor, the opinion concluded counsel could not. It relied on DR 1-102(a), which prohibits a lawyer from circumventing the disciplinary rules through the actions of another.

Third, on a proposed requirement that an attorney who believes he cannot provide competent representation under the insurer's litigation guidelines must first discuss the situation with the insurer, the opinion concluded that such preliminary discussions are permissible, but confidential communications cannot be disclosed without the client's consent, and that if disagreement persists, 99-F-143 requires the attorney to disregard the insurer's directives and proceed as the attorney believes is in the client's best interest.

Currency note

This opinion was issued in 1999, before Tennessee's adoption of the 2003 Rules of Professional Conduct, which replaced the former Code of Professional Responsibility (including DR 4-101 and DR 1-102(a)) on which it relied, and before the ABA's 2002 Ethics 2000 revisions. Subsequent rule amendments or later opinions may have changed the analysis. Treat this page as historical context, not current guidance. Verify against the current rules before relying on any specific rule or requirement mentioned here.

Common questions

Q: Could counsel redact the confidential parts and skip the client's consent?

A: Per the opinion, no. It concluded the client, not the attorney, decides what is a "secret" (which can be almost any information the client wishes withheld), so client consent remains necessary for any disclosure.

Q: Could counsel send the bill to the insurer to forward to the auditor?

A: The opinion concluded that doing so would circumvent the disciplinary rules through the actions of another, which DR 1-102(a) prohibits.

Q: What if counsel and the insurer disagree about the defense?

A: The opinion permitted a preliminary discussion (without disclosing confidential information absent consent), but concluded that if the disagreement persists, counsel must disregard the insurer's directives and proceed in the client's best interest, as 99-F-143 requires.

Background and rules framework

The opinion interpreted the former Code's DR 4-101 (confidences and secrets) and DR 1-102(a) (a lawyer shall not circumvent the disciplinary rules through the actions of another). The modern analog for the confidentiality holding is RPC 1.6 (Model Rule 1.6). It clarified and reaffirmed 99-F-143 and cited 82-F-25 on the breadth of "secrets."

Citations and references

Rules of Professional Conduct (former Code):

• DR 4-101 (confidences and secrets). Modern analog: Model Rule 1.6 / Tennessee RPC 1.6
• DR 1-102(a) (no circumvention through the actions of another)

Other opinions cited:

• Tennessee Formal Ethics Opinions 99-F-143 (clarified) and 82-F-25 (breadth of "secrets")

See also

• Tennessee Op. 99-F-143: Insurer Bill Audits and Defense Directives
• Colorado Op. 107: Third-Party Auditors in Insurance Defense
• Oklahoma Op. 314: Insurer Submission of Defense Bills to Outside Auditors

Source

• Landing page: https://www.tbpr.org/ethic_opinions/99-f-143a

Original opinion text

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

99-F-143(a) - Insurance Company Directing Attorney

BOARD OF PROFESSIONAL RESPONSIBILITY OF THE SUPREME COURT OF TENNESSEE

Formal Ethics Opinion 99-F-143(a)

A further inquiry regarding the relationship between lawyers, who are appointed by insurance companies to defend insureds, and insurance companies.

Board of Professional Responsibility Formal Ethics Opinion 99-F-143 (6-14-99) addresses the increasing tendency of insurance companies to audit the bills and files of attorneys retained to represent their insureds. The opinion states that prior to allowing auditors to review attorney’s bills and case files, client consent must be given. The opinion also mandates that attorneys are not allowed to enter into any agreement to represent an insured whereby the insurance company has the power to direct the manner of the attorney’s representation.

A request for a clarification of this opinion has been presented to the Board. The first issue presented in this request is whether an attorney may comply with the aforesaid opinion simply by “redacting” the confidences and secrets from the clients’ files and bills prior to submitting them to the auditors. It should be reiterated that if a client consents, there is no problem submitting any file or bill to an auditor. DR 4-101(a) requires a lawyer to keep not only information protected by the attorney/client privilege confidential, but also any “secret”. “Secrets” include “other information gained in the professional relationship that the client has requested to be held inviolate or the disclosure which would be embarrassing or would likely to be detrimental to the client.” “A secret” can therefore be almost anything the client does not wish to be disclosed. For instance, in Board of Professional Responsibility Formal Opinion No. 82-F-25 (February 22, 1982), the Board noted that even zip codes, birth dates, race, sources of referral, etc., may be considered “secrets”. It is not up to the attorney to determine what the client wishes to keep confidential or secret. Thus an attorney cannot unilaterally make redactions based on his/her personal judgment as to the confidentiality of certain information in his/her file. Client consent remains necessary for any disclosure.

The second issue is whether the attorney complies with the requirements of this ethics opinion by sending the bill not directly to the audit service, but to the insurance company with the knowledge that the insurance company may forward the bill to the auditor. DR 1-102(a) states that a lawyer “shall not circumvent the disciplinary rules through actions of another.” Therefore, a lawyer cannot evade the requirements of the aforesaid opinion by participating in a scheme whereby the insurance company forwards the bill to the auditor.

The final issue relates to a proposed insurance company requirement that an attorney, who feels he/she cannot provide competent representation to a client under the insurer’s litigation guidelines, must first discuss the situation with the insurance company. Such preliminary discussions are permissible, but confidential communications or information cannot be disclosed without the client’s consent. If after the discussion the attorney and the insurance company continue in disagreement as to specific aspects of the attorney’s representation, Opinion No. 99-F-143 requires the attorney to disregard the insurance company’s directives and to proceed in the direction he/she believes to be in the best interest of his/her client.

This 10th day of September, 1999.

ETHICS COMMITTEE

Johanna J. McGlothlin, Chair

Richard A. Fisher

Tom Hill

John J. Walton

APPROVED AND ADOPTED BY THE BOARD