Can an insurance company's staff defense lawyer share office space with a non-lawyer adjuster from the same company who evaluates coverage on the lawyer's cases?

Plain-English summary

The opinion addresses a lawyer employed by an insurance company who defends the company's insureds, sharing office space with a non-lawyer adjuster, also a company employee, who evaluates coverage and is prepared to question whether particular claims are covered. Some of the lawyer's cases are subject to that adjuster's coverage evaluation.

The Committee first confirms that neither the Rules nor Texas statutory law bars an insurance company's employee lawyer from representing an insured where the interests of the insured and the insurer are congruent, citing Unauthorized Practice of Law Committee v. American Home Insurance Co. The lawyer owes the insured unqualified loyalty, and because the lawyer also has obligations to the insurer, Rule 1.06 conflicts may arise that could make continued representation of the insured impossible.

On the office-sharing question, the Committee notes the Rules do not specifically forbid sharing office space with a non-lawyer, but Rule 1.05 still requires protecting client confidential information (citing Opinion 493). The lawyer must take all reasonable steps so that no client's confidential information is available to the adjuster or anyone else not working for the lawyer, including restricting access to files, computers, electronically stored information, printers, telephones, fax machines, and copiers, and training staff to protect confidences. Under Rule 5.03(a), the lawyer must make reasonable efforts to ensure supervised non-lawyer assistants act compatibly with the lawyer's professional obligations.

In practice

Under this opinion, and under the Texas rules as they stood at the time, an insurer's staff defense lawyer may share office space with a non-lawyer company adjuster, but the arrangement is permissible only if the lawyer affirmatively walls off client confidential information. The Committee reads Rule 1.05 to require all reasonable steps so the adjuster (or anyone else not working for the lawyer) cannot access client confidential information, listing controls on files, computers, stored data, and shared equipment, plus staff training, and points to Rule 5.03(a) for supervision of non-lawyer assistants. The opinion also flags that the lawyer's dual obligations to insured and insurer can produce Rule 1.06 conflicts that may bar continued representation of the insured.

Common questions

Q: Can an insurance company's in-house defense lawyer share an office with a claims adjuster?

A: Yes, with safeguards. Per Opinion 609, the Rules do not bar sharing office space with a non-lawyer adjuster, but the lawyer must take appropriate steps to protect every client's confidential information.

Q: What steps does the lawyer have to take to protect confidences?

A: All reasonable steps so no client confidential information reaches the adjuster or anyone not working for the lawyer. The Committee lists restricting access to files, computers, electronically stored information, printers, telephones, fax machines, and copiers, and training staff to protect confidences.

Q: Does the staff lawyer have any conflict concerns beyond confidentiality?

A: Yes. The Committee notes the lawyer owes the insured unqualified loyalty and, because the lawyer also has obligations to the insurer, Rule 1.06 conflicts may arise that could make it impossible to continue representing the insured.

Background and rules framework

The opinion interprets Texas Disciplinary Rule 1.05 (confidentiality of information), corresponding to ABA Model Rule 1.6; Rule 1.06 (conflict of interest: general rule), corresponding to ABA Model Rule 1.7; and Rule 5.03(a) (responsibilities regarding non-lawyer assistants), corresponding to ABA Model Rule 5.3. It relies on the Texas Supreme Court's treatment of insurance staff counsel in Unauthorized Practice of Law Committee v. American Home Insurance Co.

Citations and references

Rules of Professional Conduct:

• MR 1.6 (confidentiality of information)
• MR 1.7 (conflict of interest: current clients)
• MR 5.3 (responsibilities regarding nonlawyer assistance)
• Texas Disciplinary Rule 1.05
• Texas Disciplinary Rule 1.06
• Texas Disciplinary Rule 5.03(a)

Cases:

• Unauthorized Practice of Law Committee v. American Home Insurance Co., Inc., 261 S.W.3d 24 (Tex. 2008), an insurance defense lawyer may represent both insurer and insured but must protect the insured's interests from compromise by the insurer

Other opinions cited:

• Texas Professional Ethics Committee Opinion 493 (February 1994): a lawyer sharing office space with a non-lawyer must comply with Rule 1.05's protection of client confidential information

See also

No sibling opinions yet indexed.

Source

• Landing page: https://www.legalethicstexas.com/resources/opinions/opinion-609/
• Original PDF: https://tcle-web.s3.amazonaws.com/public/documents/Opinion_609.pdf

Original opinion text

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

QUESTION PRESENTED

Under the Texas Disciplinary Rules of Professional Conduct, may a lawyer who is an employee of an insurance company and who represents persons insured by the company with respect to claims covered by liability insurance policies issued by the company share an office with a non-lawyer insurance adjuster, who is employed by the insurance company to handle on behalf of the company questions regarding coverage in particular cases under company insurance policies?

STATEMENT OF FACTS

A lawyer is an employee of an insurance company. A major part of the job of the lawyer is to provide representation to persons insured by the insurance company who are being sued on claims that appear to be covered by liability insurance policies issued by the insurance company. The lawyer shares office space with a non-lawyer insurance adjuster, who is also an employee of the insurance company and who handles on behalf of the insurance company issues concerning the extent of the coverage that is applicable under company insurance policies in the circumstances of particular insured persons. Part of the role of the insurance adjuster is to be prepared to question the extent to which particular claims asserted against insured persons are actually covered by liability policies issued by the insurance company. Some of the matters for which the lawyer provides representation are matters that are subject to evaluation by the insurance adjuster as to whether and to what extent a company-issued insurance policy provides coverage for the matter.

DISCUSSION

The Texas Disciplinary Rules of Professional Conduct and Texas statutory law do not prohibit a lawyer who is an employee of an insurance company from representing a person insured by the insurance company so long as the interest of the insured and the interest of the insurance company are congruent. See Unauthorized Practice of Law Committee v. American Home Insurance Co., Inc., 261 S.W.3d 24, 26-27 (Tex. 2008). “[W]e have never held that an insurance defense lawyer cannot represent both the insurer and the insured, only that the lawyer must represent the insured and protect his interests from compromise by the insurer.” 261 S.W.3d at 42 (emphasis in original). As is true in the case of any client, the lawyer in this situation owes his client, the insured, unqualified loyalty. 261 S.W.3d at 41. In addition, since the lawyer will have obligations as a lawyer both to the insured and to the insurance company, there will exist the risk that conflicts of interest may arise where, under Rule 1.06 of the Texas Disciplinary Rules of Professional Conduct, it may be impossible for the lawyer to continue to represent the insured.

The Texas Disciplinary Rules of Professional Conduct do not specifically prohibit a lawyer from sharing office space with a non-lawyer. However, a lawyer sharing office space with a person who is not a part of the lawyer’s law firm is required to comply with all requirements of the Texas Disciplinary Rules, including the requirements of Rule 1.05 concerning the protection of a client’s confidential information. See Professional Ethics Committee Opinion 493 (February 1994). In view of the lawyer’s duties under Rule 1.05 not to disclose a client’s confidential information or to use such information adversely to the client’s interests, the lawyer in these circumstances is obligated to take all reasonable steps necessary to protect each client’s confidential information so that no confidential information of a client is available to the insurance adjuster or to anyone else not working for the lawyer who will have access to the shared office space or equipment, including computer systems, used by the lawyer. Such steps should include, as necessary, restricting access to client files, computers, electronically stored information, printers, telephones, fax machines and copiers. In addition, members of the lawyer’s staff should be trained and instructed to protect client confidences. Sharing confidential information with non-lawyer office staff, such as a receptionist or secretary, will be permissible only if the lawyer has taken effective steps to ensure that all confidential information of each client is protected from transmission to any person other than the lawyer and persons acting on behalf of the lawyer. In this regard, Rule 5.03(a) requires that a lawyer having direct supervisory authority over non-lawyer assistants make reasonable efforts to ensure that the assistants’ conduct is compatible with the professional obligations of the lawyer.

CONCLUSION

Under the Texas Disciplinary Rules of Professional Conduct, it is permissible for a lawyer who is an employee of an insurance company and who represents persons insured by the company with respect to claims covered by liability insurance policies issued by the company to share an office with a non-lawyer insurance adjuster, who is employed by the insurance company to handle on behalf of the company questions regarding coverage in particular cases under company insurance policies, provided that the lawyer takes appropriate steps to protect the confidential information of all clients represented by the lawyer.

Tex. Comm. On Professional Ethics, Op. 609 (2011)