If an insured stops cooperating in the defense the insurer is paying for, can the insurer-retained lawyer tell the insurance company about the non-cooperation when withdrawing?

Plain-English summary

The opinion involves a lawyer the insurer (Company) retained to defend its insured (Defendant) in a personal-injury suit. The lawyer obtained Defendant's informed consent to the representation, told Defendant the lawyer would keep the Company apprised, and Defendant initially cooperated but then stopped communicating despite repeated efforts (including an investigator and a warning letter). The non-cooperation makes the case hard to defend, risks discovery sanctions, and may breach the policy's cooperation clause, which could prompt the Company to withdraw coverage. The lawyer plans to withdraw and asks what may be disclosed to the Company.

The Committee confirms an attorney-client relationship between the lawyer and the insured (citing Opinion 668). Under Rule 1.15(b), permissive withdrawal is available where the client fails substantially to fulfill an obligation regarding the lawyer's services after reasonable warning (1.15(b)(5)), where the representation has been rendered unreasonably difficult (1.15(b)(6)), or for other good cause (1.15(b)(7)); Defendant's conduct supports withdrawal (citing In re Daniels), and the motion must comply with Rule 10 of the Texas Rules of Civil Procedure.

But the lawyer must still protect Defendant's confidential information, which under Rule 1.05(a) includes unprivileged client information, and the failure to communicate is at least that. Rule 1.05(b)(1) and (2) bar revealing confidential information to a third person or using it to the client's disadvantage absent consent, and Defendant is not reachable to give consent. The Rule 1.05(c) to (e) exceptions do not apply: disclosure here would not be to carry out the representation. So the lawyer may not disclose the non-cooperation to the Company, regardless of the coverage consequences, and may not use it to Defendant's disadvantage. The lawyer also may not reveal the failure to communicate to explain the withdrawal; per Comment 3 to Rule 1.15, a statement that "professional considerations require termination" should ordinarily suffice (the opinion cites ABA Formal Opinion 476). The rules do not, however, prevent giving notice of the fact of withdrawal (Comment 21 to Rule 1.05).

In practice

Under this opinion, and under the Texas rules as they stood at the time of the opinion, insurer-retained counsel facing a non-cooperating insured may withdraw under Rule 1.15(b) (complying with Rule 10 of the Texas Rules of Civil Procedure) but must protect the insured's confidential information. The opinion holds the lawyer may not, without the insured's consent, disclose the non-cooperation to the insurer even if that could end coverage, and should state only that professional considerations require withdrawal, while remaining free to give notice of the fact of withdrawal; a court may in some circumstances require more information.

Common questions

Q: My insured client went silent. Can I withdraw?

A: Per Opinion 669, yes; Rule 1.15(b) permits withdrawal where the client fails to fulfill an obligation after reasonable warning or has rendered the representation unreasonably difficult, and the motion must comply with Rule 10 of the Texas Rules of Civil Procedure.

Q: Can I tell the insurer the client stopped cooperating?

A: No, not without the insured's consent. The opinion holds the non-cooperation is the insured's confidential information under Rule 1.05, so the lawyer may not disclose it to the insurer even though it could lead the insurer to deny coverage.

Q: What do I say is the reason for withdrawing?

A: The opinion states the lawyer should give only a general explanation that professional considerations require withdrawal (Comment 3 to Rule 1.15), though a court may sometimes require additional information; the lawyer may still give notice of the fact of withdrawal.

Background and rules framework

The opinion interprets Texas Disciplinary Rule 1.15(b) (permissive withdrawal), which corresponds to ABA Model Rule 1.16, and Rule 1.05 (confidentiality of information, including the definition of unprivileged client information and the disclosure limits in 1.05(b)), which corresponds to ABA Model Rule 1.6. It also references Rule 10 of the Texas Rules of Civil Procedure governing the mechanics of withdrawal.

Citations and references

Rules of Professional Conduct:

• MR 1.16 (declining or terminating representation)
• MR 1.6 (confidentiality of information)
• Texas Disciplinary Rules 1.15(b), 1.05(a), 1.05(b)

Court rules:

• Tex. R. Civ. P. 10 (withdrawal of counsel)

Cases:

• In re Daniels, 138 S.W.3d 31 (Tex. App.-San Antonio 2004, orig. proceeding)

Other opinions cited:

• Texas Professional Ethics Committee Opinion 668 (November 2017): insurer-retained counsel's duties to the insured
• ABA Formal Opinion 476 (2016): confidentiality when withdrawing for nonpayment in civil litigation

See also

• TX Ethics Op. 668: Insurance Staff Counsel and a Co-Insured Plaintiff's Statement
• ABA Formal Op. 476: Confidentiality When Withdrawing for Nonpayment of Fees
• TX Ethics Op. 648: Sending Confidential Information by Email

Source

• Landing page: https://www.legalethicstexas.com/resources/opinions/opinion-669/
• Original PDF: https://tcle-web.s3.amazonaws.com/public/documents/Opinion_669.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 retained by an insurance company notify the insurance company that the insured client he was assigned to represent is not cooperating in the defense of the client's lawsuit?

STATEMENT OF FACTS

Plaintiff sued Defendant in state court for personal injury damages arising out of an automobile accident. Defendant's insurance company ("Company") assigned Defendant's case to a Texas lawyer ("Lawyer"). Lawyer met with Defendant, explained that Company retained him to represent Defendant, explained Defendant's responsibilities in defending the lawsuit, notified Defendant he would be keeping the Company apprised of the status of the lawsuit, and obtained Defendant's informed consent to the representation.

Defendant initially cooperated in defending the lawsuit. Later, however, Defendant stopped communicating with Lawyer. Lawyer tried contacting Defendant by various methods. Lawyer eventually hired an investigator, who spoke with Defendant and asked him to contact Lawyer. Defendant did not do so.

Lawyer is concerned about Defendant's failure to communicate with him, which makes the lawsuit difficult (if not impossible) to defend and may result in the imposition of sanctions for Defendant's failure to comply with outstanding discovery requests. Lawyer also realizes that Defendant's failure to communicate may violate the cooperation provision of Defendant's insurance policy and thus result in Company's withdrawing coverage.

Lawyer's investigator delivered a letter to Defendant, informing Defendant that if he did not contact Lawyer, Lawyer would file a motion to withdraw. Lawyer received no response from Defendant. Lawyer therefore plans to withdraw under Rule 10 of the Texas Rules of Civil Procedure. Lawyer is concerned about what he may disclose to Company regarding his reasons for withdrawing.

DISCUSSION

When a lawyer represents an insured at the request of an insurance company, the attorney and the insured have an attorney-client relationship, and the Texas Disciplinary Rules of Professional Conduct govern the attorney's conduct. Professional Ethics Committee Opinion 668 (Nov. 2017).

Rule 1.15 of the Rules discusses mandatory and permissive withdrawal from representing a client. Rule 1.15(b) states that permissive withdrawal is not prohibited in a number of circumstances, including these:

"(5) the client fails substantially to fulfill an obligation to the lawyer regarding the lawyer's services . . . and has been given reasonable warning that the lawyer will withdraw unless the obligation is fulfilled;
(6) the representation . . . has been rendered unreasonably difficult by the client; or
(7) other good cause for withdrawal exists."
Rule 1.15(b)(5)-(7).

Here, Defendant has repeatedly failed to "fulfill an obligation to the lawyer" by ignoring his obligation to communicate with and assist Lawyer in responding to discovery, despite receiving a reasonable warning that Lawyer would withdraw unless the obligation were fulfilled. Rule 1.15(b)(5). Defendant's failure to communicate has also rendered the representation unreasonably difficult. Rule 1.15(b)(6). Lawyer therefore has grounds to withdraw from representing Defendant. See In re Daniels, 138 S.W.3d 31, 35 (Tex. App.-San Antonio 2004, orig. proceeding) (ordering the trial court to grant the motion to withdraw). When Lawyer files the motion to withdraw, he must comply with all applicable law, including Rule 10 of the Texas Rules of Civil Procedure.

Although Lawyer plans to file a motion to withdraw from representing Defendant, Lawyer must continue to preserve Defendant's "confidential information," which includes both "privileged information" and "unprivileged client information." Rule 1.05(a). "Unprivileged client information" is "all information relating to a client or furnished by the client, other than privileged information, acquired by the lawyer during the course of or by reason of the representation of the client." Id. At a minimum, Defendant's failure to communicate with Lawyer is unprivileged client information.

Rule 1.05(b)(1) and (2) provide that a lawyer shall not knowingly reveal a client's confidential information to third persons the client has not instructed to receive the information and shall not use a client's confidential information to the disadvantage of the client unless the client consents after consultation. Because Defendant is not communicating with Lawyer, Lawyer cannot obtain instructions or consent from Defendant.

Rule 1.05 paragraphs (c) to (e) list exceptions to the general rule that a lawyer may not disclose confidential client information to third parties or use it to the disadvantage of the client, but those exceptions are not applicable here. For example, Rule 1.05(d)(1) and 1.05(d)(2)(i) permit disclosing unprivileged client information in order to carry out the representation. The disclosure here, however, would not be for the purpose of carrying out the representation. Thus, Lawyer may not disclose Defendant's confidential information, including Defendant's lack of cooperation, to Company, regardless of whether such disclosure may lead to Company's withdrawing coverage. Moreover, of course, Lawyer may not use Defendant's lack of cooperation to Defendant's disadvantage.

Furthermore, Lawyer may not reveal Defendant's failure to communicate in order to explain to Company the reason for Lawyer's withdrawal from the representation. With respect to the reasons for withdrawal, a statement to the court and to Company "that professional considerations require termination of the representation ordinarily should be accepted as sufficient." Rule 1.15 cmt 3. See also ABA Comm. on Ethics and Prof'l Responsibility, Formal Op. 476 (2016) (discussing confidentiality issues when moving to withdraw for nonpayment of fees in civil litigation). Although the Rules prohibit disclosing confidential information, the Rules do not prevent Lawyer from giving notice of the fact of withdrawal. Rule 1.05 cmt 21 ("Neither this Rule nor Rule 1.15 prevents the lawyer from giving notice of the fact of withdrawal . . . .").

CONCLUSION

Under the Texas Disciplinary Rules of Professional Conduct, if an insured fails to communicate with a lawyer who is retained to defend the insured, then the lawyer may withdraw from the representation. In that event, the lawyer must protect the insured's confidential information and may not, in the absence of the insured's consent, disclose to the insurance company the reason for the withdrawal. In connection with moving to withdraw from the suit, the lawyer should avoid disclosing, either to the court or to the insurance company, the specific reason for the withdrawal. The lawyer instead should provide only a general explanation that professional considerations require withdrawal, although there are circumstances in which a court may require that additional information be provided to the court.

Tex. Comm. On Professional Ethics, Op. 669 (2018)